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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10/A-1
General Form for Registration of Securities
Pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934
PROFIT FINANCIAL CORPORATION
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(Exact Name of Registration as Specified in Its Charter)
UTAH 91-1772094
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(State or Other Jurisdiction of (IRS Employer)
Incorporation or Organization)
14675 Interurban Avenue South
Seattle, Washington 98168
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(Address of Principal Executive Offices) (Zip Code)
(206) 901-3000
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(Registrant's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
None None
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Securities to be registered pursuant to Section 12(g) of the Act:
Class A Common Stock $.01 par value
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(Title of Class)
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(Title of Class)
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THIS REGISTRATION STATEMENT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
("EXCHANGE ACT"). ACTUAL RESULTS OR EVENTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED OR CONTEMPLATED BY SUCH STATEMENTS AS THE RESULT OF VARIOUS FACTORS
INCLUDING, WITHOUT LIMITATION, THE RISK FACTORS DISCUSSED IN THIS REGISTRATION
STATEMENT. THE CONSIDERATIONS DISCUSSED IN THIS REGISTRATION STATEMENT ARE NOT
INTENDED TO REPRESENT A COMPLETE LIST OF THE GENERAL OR SPECIFIC RISKS THAT MAY
AFFECT THE CLASS A COMMON STOCK ("COMMON STOCK") OF PROFIT FINANCIAL CORPORATION
("PROFIT, AND, TOGETHER WITH ITS DIRECT AND INDIRECT SUBSIDIARIES, THE
"COMPANY"). IT SHOULD BE RECOGNIZED THAT OTHER RISKS MAY BE SIGNIFICANT, NOW OR
IN THE FUTURE, AND THE RISKS SET FORTH BELOW MAY AFFECT THE COMMON STOCK OF THE
COMPANY TO A GREATER EXTENT THAN INDICATED.
THE COMPANY COMPLETED A TWO-FOR-ONE STOCK SPLIT OF ITS COMMON STOCK IN SEPTEMBER
1996. ALL SHARE AND PER SHARE INFORMATION CONTAINED HEREIN AND THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO HAVE BEEN ADJUSTED TO REFLECT THE IMPACT
OF THE STOCK SPLIT UNLESS OTHERWISE INDICATED.
RISK FACTORS
An investment in the Common Stock of the Company involves a high degree
of risk. Prospective investors should carefully consider the following factors,
together with the other information contained in this Registration Statement, in
evaluating the Company and its business before purchasing shares of Common Stock
of the Company.
Dependence on Wade B. Cook
The Company's future prospects and financial condition depend in large
part on the continued services of Wade B. Cook, the Company's founder and the
President and Chairman of the Company ("Mr. Cook"). Substantially all of the
programs, products and services provided by the Company are based on materials
and ideas developed by Mr. Cook. The loss of the services of Mr. Cook could have
a material and adverse effect on the Company's business, financial condition and
results of operation. See "Business" and "Certain Relationships and Related
Transactions".
Dependence on Certain Relationships
The Company derived the preponderance of its revenues in the fiscal
years ended December 31, 1996, 1995 and 1994 from sponsoring and promoting
products, seminars and services licensed from Money Chef, Inc., formerly known
as USA/Wade Cook Seminars, Inc. ("Money Chef"), and believes that it will
continue to derive the majority of its revenues in the foreseeable future from
these sources. In January 1993, the Company entered into a Product Agreement
with Money Chef for the right to promote and sponsor seminars, entity formation
services and products owned or controlled by Money Chef. In June, 1997, the
Company renegotiated the Product Agreement. Mr. Cook is the President of Money
Chef and is a trustee of a trust, created for the benefit of Mr. Cook's family,
that owns all of the outstanding shares of Money Chef. Any factor adversely
affecting the Company's relationship with Mr. Cook or
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Money Chef could have a material and adverse effect on the Company's business,
financial condition and results of operation.
See "Business-Dependence on Certain Relationships", "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
"Certain Related Transactions".
Managing Growth
The Company has recently experienced rapid and dramatic growth in the
number of employees, the number of classes and seminars offered by the Company,
the scope of its operating and financial management system and the geographic
areas of its operations. This growth has resulted in a significant increase in
the level of responsibility for both existing and new management personnel. The
Company's ability to manage growth will require it to continue to implement and
improve its operational, financial and management systems and to motivate and
effectively manage an increasing number of employees. The Company's failure to
manage its growth effectively could have a material and adverse effect on the
Company.
Limited Operating History
The Company has a limited operating history, and although the Company
has experienced significant growth since the reorganization of the Company in
1995, this is not necessarily indicative of future operating results. No
assurance can be given that the Company will be able to maintain profitability
on a quarterly or annual basis in the future.
Dependence on Successful Introduction of New Programs, Products and Services
The Company's growth strategy is dependent on its ability to sell
existing programs, products and services to additional markets and on its
continued ability to successfully develop and introduce new programs, products
and services. Although the Company is currently developing new programs and
products, it may need to rely upon the willingness of authors and producers of
products and programs to sell or license them to the Company. There can be no
assurance that the Company will be able to develop or acquire rights to
additional products and programs that it seeks on acceptable terms. Further,
market conditions and the level of customer interest may be different for the
Company's current products than for new products or programs, and there can be
no assurance that the Company will be able to compete favorably with, and obtain
market acceptance for, any new products and programs. Failure of the Company to
successfully develop, acquire, introduce and market new products and programs
could have a materially adverse effect on the Company's business and future
prospects.
Dependence on Changing Economic Conditions
The Company's revenues and profitability may be significantly affected
by general economic conditions. A significant portion of the Company's revenues
are derived from individuals who, the Company believes, may adjust their
expenditures for educational seminars and materials during economic downturns.
Should the economy weaken in any future period, these individuals may not
increase or may decrease their expenditures on the type of programs, products
and services provided by the Company, which would have a material and adverse
effect on the Company's business, financial condition and results of operations.
In addition, the Company has significant investments in marketable
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securities and may have significant investments in the real estate market. Any
weakening of the economy in any future period may have a material and adverse
effect on the investments held by the Company. See "Business - Real Estate and
Other Investments".
Potential Liability
The Company faces exposure to potential claims in the event that the
methods and techniques presented in its programs and products are alleged to
have resulted in significant losses to an investor using such methods and
techniques. The Company requires its customers to execute a letter acknowledging
the risks inherent in following the investment and other strategies presented by
the Company. There can be no assurances that the Company will be able to avoid
any claims asserting such liability. In addition, any such claims or litigation
could result in the diversion of the management's attention and resources, which
could have a material and adverse effect on the Company. Although the Company
currently has general liability insurance, there can be no assurance that
insurance coverage will continue to be available in the future on commercially
reasonable terms, or at all, or that such insurance will be adequate to cover
potential liability claims or that a loss of insurance coverage or the assertion
of a liability claim or claims would not materially adversely affect the
Company's business, financial condition and result of operations.
Competition
The highly competitive market in which the Company competes is
fragmented and decentralized, with low barriers to entry. The management of the
Company believes that the Company is a leader in the financial education market
and that no single competitor accounts for a dominant market share. The
Company's competitors include other companies and individuals who promote and
conduct seminars and provide products on topics relating to investment
strategies, financial planning and personal wealth management. The Company
believes that the majority of independent training providers are small
organizations, which often provide training as one of several services or
product lines or provide limited services and product lines. There can be no
assurance that the Company will be successful in maintaining its current
position in the financial education market or continue to be successful against
such competition. See "Business-Competition".
Risk Associated with Possible Acquisitions and Other Investments
Historically, the Company has invested the majority of its excess cash
in marketable securities. The Company has also made small investments in certain
venture capital partnerships and private companies. Although the Company is
continuing to invest a significant portion of its cash flow in marketable
securities, it is also aggressively seeking alternative vehicles through which
the Company can invest cash flow from its programs, products and services and
from its existing investment portfolio. A significant portion of the assets of
the Company may be used for the acquisition of real property and ownership
interests in limited partnerships that invest in real property. The Company is
actively evaluating acquisition and other investment opportunities that fit
within the investment strategy of the Company. Depending on the investment
opportunities that become available to the Company, the Company may also seek to
expand its existing investment portfolio to include, among other things,
substantial interests in private and public companies in related and unrelated
businesses. The type of investments that the Company is seeking and investing in
involve numerous risks, including potential difficulties in the assimilation of
acquired assets, diversion of management's attention away from normal
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operating activities and the diversion of the Company's resources from other
investment opportunities. The Company has limited experience in executing and
implementing such investments and no assurances can be given as to the success
of the Company in executing and implementing the investments that the Company is
currently involved with or may be involved with in the future. See
"Business-Real Estate and Other Investments".
Control by Management
As of June 24, 1997, senior management of the Company collectively owns
approximately 60.4% of the outstanding shares of Common Stock. Mr. Cook and
entities affiliated with Mr. Cook own approximately 60.1% of the outstanding
shares of Common Stock. Consequently, the senior management, and Mr. Cook in
particular, will continue to have a significant influence over the policies and
affairs of the Company and will be in a position to determine the outcome of
corporate actions requiring stockholder approval, including the election of
directors, the adoption of amendments to the Company's corporate documents and
the approval of mergers and sales of the Company's assets. See "Security
Ownership of Certain Beneficial Owners and Management".
ITEM 1. BUSINESS.
Profit is a holding company. Wade Cook Seminars, Inc., Profit's
wholly-owned subsidiary ("WCSI"), markets and delivers a variety of seminars and
workshops focused on investment strategies, financial planning and personal
wealth management and produces and sells audiotapes, videotapes, books and other
written materials designed to teach various investment strategies and financial
planning techniques. In addition, WCSI hosts a web site on the Internet at
http://www.wadecook.com as an additional tool to recruit students and market its
programs, products and services. WCSI accounted for almost all of the Company's
revenues for the fiscal year ended December 31, 1996 ("fiscal 1996").
The Company believes that it is well positioned to take advantage of
the increasing demand for information and training on investment strategies,
financial planning and personal wealth management. The Company also believes
that its approach to education and training offers many advantages over other
financial and investment seminars and related financial information products due
to the breadth and depth of its programs, products and services, the quality and
size of its instructor force and its strong marketing and sales team.
Two other of the Company's subsidiaries, Left Coast Advertising, Inc.
("Left Coast") and Lighthouse Publishing Group, Inc. ("Lighthouse Publishing"),
conduct advertising and publishing services, respectively, for the Company.
The Company's principal executive office is located at 14675 Interurban
Avenue South, Seattle, Washington 98168 and its telephone number is (206)
901-3000.
Business Strategy
The Company's objective is to increase its leadership position on
personal finance. In pursuit of its objective, the Company's strategy is to:
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Expand its Market into Smaller Cities. Historically, the Company has
marketed and provided its seminars and products to residents located in or near
cities in the United States with populations over one million. The Company will
be expanding to cities with smaller populations in the future to broaden its
market penetration.
Expand Program and Product Offerings. The Company is currently
developing and will continue to expand its library of programs, products and
services to increase sales to its existing customers and to attract new
customers. The Company hopes to offer a comprehensive array of programs,
products and services on almost all aspects of investment strategies, financial
planning and wealth management.
Explore Other Means of Advertising. To access new clients, the Company
will explore other means of advertising, including television infomercials and
advertising and newsprint advertising, to reach individuals who may be
interested in the products, programs and services offered by the Company.
Strengthen Customer Base in Existing Markets. The Company has only
recently begun marketing and providing its programs, products and services in
many markets. The Company will seek to aggressively market its programs,
products and services in the newer markets to attract new customers and increase
sales to existing customers.
Explore Strategic Alliances. To increase sales of its programs and
products, the Company will explore opportunities for strategic alliances and
collaborative efforts with book clubs and major bookstore chains and with
providers and developers of programs and products consistent with the strategic
vision of the Company.
Prior Business History
Prior to May 18, 1995, the Company's educational seminar business was
conducted by United Support Association, Inc. ("USAI"), a corporation
incorporated in Nevada in 1989 that was owned by the Wade B. Cook Family Trust.
On May 18, 1995, Profit acquired all of the outstanding capital stock of USAI in
exchange for 1,880,000 shares of Profit's common stock. Profit was formed in
1979 as a Utah corporation under the name Profiteer Corporation. Prior to June
1, 1995, Profit engaged primarily in farming and ranching in Utah. USAI's name
was changed to "Wade Cook Seminars, Inc." in February 1997 due in part to the
marketing advantages of using Mr. Cook's name and associating the programs with
his successful publications.
Principal Programs, Products and Services
Substantially all of the Company's programs, products and services are
based on the financial and investment strategies of Mr. Cook. The Company has
the right to promote, produce and sell these programs, products and services
pursuant to the terms of a Product Agreement with Money Chef. See "--Dependence
on Certain Relationships" below. Mr. Cook has based his programs and products on
his belief that people need to: (a) increase their wealth by increasing their
cash flow; (b) learn how to minimize their federal and state income taxes; (c)
use entities, such as Nevada corporations, family limited partnerships, living
trusts, qualified pensions and business trusts, to protect their assets; (d) be
able to retire with sufficient income from their assets to maintain a good
standard of living; and (e) be able to pass on their wealth and assets to their
loved ones without the problems of probate. The
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Company believes that its competitive position and its name recognition have
been greatly enhanced by the popularity of Mr. Cook's books. Since 1996, over
300,000 copies of Mr. Cook's books have been sold throughout the United States.
The Company plans to continue capitalizing on the popularity and exposure from
such books.
Educational Seminars and Workshops
The Company promotes and sponsors a series of programs designed to meet
the educational needs of clients interested in increasing their wealth and
better managing their personal finances. The seminars provided by the Company
include the following:
Financial Clinic is a three-hour seminar explaining the various
products and services offered by WCSI and providing an introduction to
investing in the stock market. The Financial Clinic is designed to
serve as an introduction to the Wall Street Work Shop. This seminar is
currently taught nationwide eight to ten times a week.
Wall Street Work Shop ("WSWS") is a two-day seminar teaching investors
the investment strategies set forth in Mr. Cook's books, Wall Street
Money Machine and Stock Market Miracles. Students are taught stock
market basic terminology, how to choose a brokerage firm, stock market
strategies, and how to place a trade. The students observe instructors
purchasing or selling securities from brokers as they follow the
investment strategies taught in the class. The Company also offers the
seminar Youth Wall Street for younger investors. This seminar is
currently taught nationwide nine to eleven times per week.
Business Entity Skills Training ("BEST") is a one-day seminar teaching
students personal finance management strategies such as asset
protection and tax reduction using corporations, limited partnerships,
qualified pensions, and living trusts. BEST is taught immediately after
the last day of each WSWS, either in the evening or the following day.
Next Step is a two-day seminar for participants who have already
attended the WSWS. Advance stock market investments strategies are
taught in a format in which students can actively participate in making
investments. Next Step is currently taught nationwide twelve times a
year.
Wealth Academy is a three-day seminar teaching wealth accumulation and
asset protection formulas using various business strategies and
corporate income tax planning to assist students in better managing
their personal finance and business activities. Wealth Academy is
currently taught nationwide six to nine times a year.
Executive Retreat is a two-day workshop designed for participants who
own or control Nevada corporations to gain a broader understanding of
the mechanics using a corporation for tax advantages, limited liability
and estate planning. The workshop is currently taught two to three
times a year at two locations.
The seminars provided by the Company accounted for approximately 52%, 53% and
30% of the Company's revenues in fiscal 1996, 1995 and 1994, respectively. The
Company typically conducts its
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seminars and workshops at major cities in the United States with populations of
over one million. The majority of the Company's seminars are held in Los
Angeles, California, Denver, Colorado, Seattle, Washington, Las Vegas, Nevada,
Washington, D.C., Orlando, Florida and Dallas, Texas. The Company derived more
than 10% of its revenues in fiscal 1996 from seminars taught in the states of
California, Colorado, Washington and Nevada.
On March 31, 1997, forty speakers conducted seminars for the Company
throughout the United States. Thirty-five of such speakers were independent
contractors and five were employees of the Company. The Company provides
extensive training to its speakers, including two-day, bi-monthly workshops with
an experienced trainer. Most speakers review training tapes and attend training
sessions for six months prior to becoming "technicians" and graduate to becoming
"secondary speakers" on tour. The best of these secondary speakers eventually
rise to the role of primary speaker. Typically, the Company's speakers are
required to enter into an agreement not to compete with the Company for a period
of generally three years after the termination of their engagement with the
Company.
Audiotapes, Videotapes, Books and Other Printed Materials
The Company's seminars and programs are supplemented by audio tapes,
video tapes, books and other printed materials that are licensed to the Company.
Sales of these products accounted for 22%, 20% and 17% of the revenues of the
Company for fiscal 1996, 1995 and 1994, respectively,
The books promoted and sold by the Company include Wall Street Money
Machine, Stock Market Miracles, Bear Market Baloney and Business Buy the Bible.
The Company also sells Brilliant Deductions, The Real Estate Money Machine, 12
Special Reports, The Incorporation Handbook, How to Pick Up Foreclosures, Owner
Financing, Cook's Book on Creative Real Estate, 101 Ways to Buy Real Estate
without Cash and 555 Clean Jokes. Each of these books was written by Mr. Cook.
The audio tapes promoted and sold by the Company include the multi-tape
audio seminars Financial Fortress Home Study and Zero to Zillions. In addition,
the Company sells single tapes that generally address the ideas and concepts
taught in its seminars. The Company's single audio tapes include: Financial 4x4;
Financial Power Pack; Paper Tigers; Unlimited Wealth; High Performance Business
Strategies; Brilliant Deductions II; Retirement Prosperity; Money Mysteries of
the Millionaires; The Power of Nevada Corporations; Entity Structuring;
Outrageous Returns; Tax Updates 1 & 2; Double Your Money Update; Everything You
Ever Wanted to Know About: Cook University; Everything You Ever Wanted to Know
About: The Wall Street Workshop; Everything You Ever Wanted to Know About: The
Real Estate Cash Flow Boot Camp; Everything You Ever Wanted to Know About:
Becoming a Travel Agent; Income Formulas; Income Streams; Stock Market Power
Strategies; Smarter Money. Mr. Cook is the primary speaker in each of these
tapes.
The videotapes promoted and sold by the Company include the multi-tape
video versions of the Company's seminars Wall Street Workshop and Next Step, as
well as single-tape videos on Dynamic Dollars, Entity Structuring and All About
Wall Street Workshop.
Entity Formation Services
The Company provides information and assistance to individuals
interested in preparing Nevada Corporations, Living Trusts, Pension Plans,
Family Limited Partnerships, Charitable Remainder Trusts
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and Business Trusts. After providing its clients with information about the
various entities, the Company typically outsources the formation of the entities
to independent outside vendors for a commission. The entity formation services
of the Company accounted for 14%, 20% and 45% of the Company's revenues in
fiscal 1996, 1995 and 1994, respectively.
WIN Subscriptions
Wealth Information Network ("WIN") is a subscription service provided
by the Company which can be accessed over the Internet 24 hours a day. WIN
provides detailed information on the Company's trades for each day using the
investment strategies discussed in Wall Street Money Machine and Stock Market
Miracles and taught in the Company's seminars. WIN also provides stock
information and updates on the Company's programs and products, including a
schedule of events and seminars provided by the Company. Subscription to WIN
accounted for 7%, 7% and 2% of the Company's revenues in fiscal 1996, 1995 and
1994, respectively.
Sales and Marketing
The Company creates interest and demand for its programs, products and
services through a mix of radio advertising, direct mail advertising and
telephone and Internet marketing.
Radio Advertising
The Company primarily uses radio advertising to reach potential
customers. Advertising on the radio permits the Company to consistently
advertise its programs and products to potential customers nationally.
Generally, the Company advertises on the radio offering a free audio tape
explaining certain stock market strategies and informing customers of a
financial clinic that will be presented by the Company. The radio advertising
attracts customers to the Financial Clinic seminars, which then introduce and
market the other programs, products and services provided by the Company. The
management of the Company believes that radio advertising is crucial to
maintaining the Company's current market niche and to maintaining or increasing
its revenues. Any factors that adversely affect the availability or
attractiveness of radio advertising for the Company, such as a significant price
increase in the cost of radio advertising, could have a material and adverse
effect on the Company's business, financial condition and results of operation.
Direct Mail Marketing and Advertising
The Company markets its programs, products and services through direct
mailing to its mailing list of over 300,000 individuals, many of whom have
previously attended one of the Company's seminars or purchased the Company's
products. A centralized marketing department develops the Company's catalogs,
brochures and advertisement using desktop publishing, and electronic pre-press
technology to create the files used to produce direct full-color film for
plate-making. This capability enables the Company to make quick improvements to
its marketing materials in order to feature the latest financial developments
and address market opportunities in a timely manner.
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Sales Team
The Company's sales force consists of over 180 people who are
responsible for responding to phone, e-mail, Internet and facsimile orders and
inquiries received by the Company, as well as for following up with existing
clients to promote additional programs, products and services. The Company
provides its sales staff daily training to refine their sales skills and to
provide updates on the products, programs and services being offered by the
Company. The Company believes its sales force has been critical to the Company's
success in selling its products, program and services.
Internet Marketing
The Company maintains an Internet web site at http://www.wadecook.com
to market and promote its programs, products and services. The web site has
information on the Company's programs, products and services and certain limited
information on stock and investment strategies. A WIN subscriber can access WIN
through the web site. The Company believes that the Internet will become an
increasingly significant marketing channel to prospective clients in the future.
Dependence on Certain Relationships
The Company derived the preponderance of its revenues in fiscal 1996,
1995 and 1994 from sponsoring and promoting products, seminars and services
licensed from Money Chef and believes that it will continue to derive the
majority of its revenues in the foreseeable future from these sources. In
January, 1993, the Company entered into a Product Agreement with Money Chef for
the rights to promote and sponsor seminars, entity formation services and
products owned or controlled by Money Chef. Mr. Cook is the President of Money
Chef and is a trustee of a trust, created for the benefit of Mr. Cook's family,
that owns all of the outstanding shares of Money Chef. Accordingly, any factor
adversely affecting the Company's relationship with Mr. Cook or Money Chef could
have a material and adverse effect on the Company's business, financial
condition and results of operation.
On June 26, 1997, Wade Cook Seminars, Inc. renegotiated the Product
Agreement for an additional period through June 30, 2002 for a flat royalty of
10% of gross sales. For fiscal years 1995 and 1996, Money Chef had the right to
take a royalty ranging from 10% to 50% of gross revenues however they opted to
take only 10%. Mr. Cook does not have an "outputs contract" with the Company and
so the Management of the Company can not guarantee that all future products
created by Mr. Cook will be licensed by the Company under the terms of the
Product Agreement.
The Company also entered into an agreement with Mr. Cook for the
publication rights in the United States, its territories, dependencies and
possessions and the republic of the Philippines and Canada and the right to sell
copies in the open market throughout the world for the books Real Estate Money
Machine, Wall Street Money Machine, Stock Market Miracles, Bear Market Baloney
and Business Buy the Bible. Under the terms of each Agreement, the Company is
obligated to pay Mr. Cook 10% of the retail selling price for each book sold.
Certain additional rights in the book are to be shared equally.
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Intellectual Property
The Company regards its seminars, workshops and other materials as
proprietary and relies primarily on a combination of statutory and common law
copyright, trademark and trade secret law, plus employee and third-party
non-disclosure agreements and other methods to protect its proprietary rights.
Notwithstanding the foregoing, a third party or parties could copy or otherwise
obtain and use the Company's materials in an unauthorized manner or use these
materials to develop programs, products and services which are substantially
similar to those of the Company. If substantial unauthorized use of the
Company's products were to occur, the Company's business and results of
operations could be materially and adversely affected. There can be no assurance
that the Company's means of protecting its proprietary rights will be adequate
or that the Company's competitors will not independently develop similar
educational materials, similar seminars, workshops and programs or delivery
methods.
Customers
The Company's customers are individuals with a broad variety of
backgrounds, who are interested in one or more of the seminar topics which are
presented by the Company. The Company is not dependent upon any single customer
for any of its businesses, and has no contracts or other agreements with any
third party pursuant to which the Company generates a material amount of its
revenues.
Competition
The highly competitive market in which the Company operates is
fragmented and decentralized, with low barriers to entry. The management
believes that the Company is a leader in the financial education market and that
no single competitor accounts for a dominant market share. The Company's
competitors include other companies and individuals who promote and conduct
seminars and provide products on topics relating to investment, financial
planning and personal wealth management. The Company believes that the majority
of independent training providers are small organizations, which often provide
training as one of several services or product lines or provide limited services
and product lines. The Company differentiates itself from these providers based
on its size, the scope and quality of its proprietary course offerings and the
number, quality and experience of its instructors. Some of these competitors
however offer courses and products similar to the Company at lower prices. In
addition, many of the Company's competitors sponsor and conduct seminars free of
charge as a marketing tool for other business. These competitors include
stockbrokers, franchisers of business opportunities and portfolio and tax
consultants. Some competitors have greater financial and other resources than
the Company. There can be no assurance that the Company will be successful in
maintaining its current position in the financial education market or continue
to be successful against such competition.
Employees and Consultants
The Company currently employs 342 full-time employees and 10 part-time
employees. In addition, the Company has engaged the services of approximately 35
independent contractors, primarily as seminar speakers. On June 24, 1997, the
Company had 80 seminar speakers (including full time and part time employees and
consultants) 39 shipping and order fulfillment employees, 186 sales staff, 5
graphics staff, 12 marketing and advertising professionals and 70 management,
legal, accounting and
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administrative staff. None of the Company's employees are represented by a labor
union. The Company believes that its relationship with its employees is good.
Real Estate and Other Investments
Historically, the Company has invested the majority of its excess cash
in marketable securities. The Company has also made small investments in certain
venture capital partnerships and private companies. Although the Company is
continuing to invest a significant portion of its excess cash in marketable
securities, it is also aggressively seeking alternative vehicles through which
the Company can invest excess cash from its programs, products and services and
from its existing investment portfolio.
Recently, the Company began focusing on investment opportunities in
real estate related markets. Primarily through Profit Financial Real Estate
Management Company, Inc., a wholly owned subsidiary of Profit ("RE Management"),
and various other subsidiaries (together, the "Real Estate Subsidiaries"), the
Company has begun investing in real estate projects. Typically, the Company
invests in real estate limited partnerships as the sole or as a significant
limited partner, and in some cases, acts as a general partner. Through these
investments, the Company has significant ownership interest in four hotels in
various stages of development and is aggressively evaluating several other real
estate investment opportunities. To date, the investment amounts per project
have ranged from $228,000 for less than 10% percent of a project to $3,450,000
for 100% ownership of a project. Of the Company's hotel/motel project
investments, one hotel is an operating business, one hotel is currently under
construction, and two are investments in real property on which hotels or motels
are scheduled or planned to be constructed under the name Fairfield Inn Suites
or Hampton Inn Suites. In late 1996, the Company purchased its headquarters in
the Seattle, Washington area for approximately $3 million and spent
approximately $2.5 million on tenant improvements.
The Company's strategy for fiscal 1997 is to continue to directly and
indirectly make real estate-related investments, including acquiring and
developing hotels and motels primarily in Utah, Nevada, California and
Washington. The Company is currently evaluating or negotiating its investment in
a variety of properties and plans on making up to fourteen additional real
estate related investments in fiscal 1997. Depending on the investment
opportunities that become available to the Company, the Company may also seek to
expand its existing investment portfolio in fiscal 1997 to include, among other
things, substantial interests in private and public companies in related and
unrelated businesses.
The type of investments that the Company is seeking involve numerous
risks, including potential difficulties in the assimilation of any acquired
assets, operations or businesses, diversion of management's attention away from
normal operating activities, and the diversion of the Company's resources from
other investment opportunities. The Company has limited experience in executing
and implementing such investments and no assurances can be given as to the
success of the Company in executing and implementing the investments that the
Company is currently involved with or may be involved with in the future.
ITEM 2. FINANCIAL INFORMATION.
The following table summarizes certain selected financial data and is
qualified in its entirety by the more detailed financial statements contained
elsewhere in this Registration Statement.
12
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1996 1995 1994 1993** 1992**
---- ---- ---- ------ ------
AUDITED AUDITED AUDITED
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales $40,724,515 $7,567,335 $1,973,145 $727,974 $573,492
Cost of Sales 15,682,936 3,373,888 861,734 146,727 118,504
---------- --------- ------- ------- -------
Operating income (loss) 4,739,876 339,446 (22,667) 351,165 393,344
Net income(loss) per share .46 .02 (.03) .14 .20
--- --- ----- --- ---
Number of shares used in
computing net income (loss)
per share* 6,623,280 6,398,426 6,398,426 2,463,228 2,368,554
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: 1996 1995 1994 1993** 1992**
Cash and cash equivalents $ 635,141 $26,840 $ 1,001 $ 11,344 $ 1,590
Working capital (3,890,698) (763,216) 10,663 1,792,582 2,928.527
Long-term obligations -- -- -- 466,860 476,529
Total assets 16,937,659 2,283,055 675,347 3,120,478 3,984,138
Total stockholders equity 3,702,024 528,899 405,101 2,432,059 3,606,467
</TABLE>
* See Note A of Notes to Financial Statements for an explanation of the
computation of per share data.
** The 1993 and 1992 figures include results of operation of business lines
which were spun off in connection with the reorganization in 1995.
*** This balance sheet information is based solely on the Company's 1993 and
1992 tax returns.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATION AND FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements and Notes to Consolidated Financial
Statements contained elsewhere in this Registration Statement.
Overview and Outlook
Profit is a holding company that, through its subsidiary WCSI, conducts
educational investment seminars and produces and sells audiotapes, videotapes,
books and other written materials focused on investment strategies, financial
planning and personal wealth management. The Company also invests in marketable
securities, and invests in real estate related limited partnership, venture
capital limited partnerships and private companies. WCSI also hosts WIN, an
electronic bulletin board service accessible via the Internet that allows
subscribers to log on for information related to the stock market on its web
site on the Internet at http://www.wadecook.com. Two other of the Company's
subsidiaries, Left Coast and Lighthouse Publishing, conduct advertising and
publishing services, respectively, for the Company.
13
<PAGE> 14
To date, the vast majority of revenues of the Company have been derived
from the educational seminars and products related to such seminars. These
seminars and related products are almost exclusively based on products and
seminars developed by Mr. Cook and are licensed to the Company by entities owned
or controlled by Mr. Cook or by members of his family pursuant to a Product
Agreement with Money Chef. The Company believes that the sales of seminars and
products developed by Mr. Cook will constitute the majority of revenues for the
Company for the foreseeable future. Accordingly, any factor adversely affecting
Mr. Cook or the Company's relationship with Mr. Cook or Money Chef would have a
material adverse impact on the Company's business, financial condition and
results of operation. See "Risk Factors-Dependence on Certain Relationships"
The Company is currently seeking to develop new seminars and products
with new authors so that it can diversify its seminar topics, protect its
current role as a leader in the educational investment seminar business, and
attract new customers. The Company may also seek joint ventures with other
similar seminar businesses to expand its customer and product base. However,
there can be no assurances that the Company will be successful in these
endeavors. The failure of the Company to successfully expand its customer and
product base and minimize its dependence on Mr. Cook may have a material and
adverse effect upon the Company's future business and prospects.
The Company believes that the success of the Wall Street Workshop,
which accounts for the vast majority of the Company's current revenues, is due
in part to the ability of its workshop facilitators to make demonstration trades
with stock brokers during the seminars to familiarize students with the
investment process. Typically, after discussing certain stock market strategies,
the facilitators will purchase or sell securities during the class to illustrate
the process of trading these investments. To allow facilitators to purchase or
sell marketable securities during the course of the Wall Street Workshops, the
Company has set up sub-accounts within its own brokerage accounts. After an
investment is made, many of these investments are sold by the Company's in-house
traders without returning the rate of return anticipated by the facilitators in
making the investment. The Company's need to maintain an adequate cash position
in every brokerage account, especially when every account is a margin account,
sometimes requires the Company to liquidate the investments made by its
facilitators, even if they produce losses. Historically, the losses have
generally been offset by the short term capital gains achieved by the
facilitators and money managers. However, there can be no assurances that losses
will not arise in the future. Although these subaccounts are only a small
portion of the Company's portfolio of assets, the risk of investing in stocks
and derivatives creates the possibility of some losses for the Company.
The investment portfolio of the Company has materially increased from
1994 through 1996. The Company intends to continue to invest in its stock market
portfolio as necessary to support the trading of securities during the Wall
Street Workshops as a teaching mechanism, to use its portfolio as a tool to
train speakers for the Wall Street Workshop and to attempt to earn investment
income. The Company intends to pursue its current stock market investment
strategies. However, there can be no assurances that the condition of the stock
market will be what the management of the Company anticipates that it will be at
any given time or that the Company will be in a position to effectively take
advantage of existing market conditions. As with any investment in the stock
market, the Company may suffer significant losses from pursuing its investment
strategies.
WCSI has grown from three employees in 1989 to over 300 employees in
1997. The increase in staffing at the Company reflects the dramatic growth in
demand for the Company's seminars and the
14
<PAGE> 15
corresponding need to increase the Company's sales forces to adequately service
the increasing customer base and to coordinate seminars in most major cities in
America.
The management of the Company believes that the historical rate of
expansion of its staff in 1994, 1995 and 1996 will slow down in 1997 as the
current number of employees is sufficient for the Company's current needs.
Although the Company has historically been profitable, there can be no
assurance that the Company will maintain or increase revenues, maintain profit
ability or avoid losses in any future period. The future results of operation,
both annually and from quarter to quarter, are subject to a variety of factors
applicable to the Company and the industries and markets in which it operates.
Results of Operations
Annual Results
The following table provides a summary of the Company's operating
results for the years 1996, 1995 and 1994:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
---- ---- ----
AUDITED AUDITED AUDITED
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales $40,724,515 $7,567,335 $1,973,145
Cost of Sales 15,682,936 3,373,888 861,734
Operating income (loss) 4,739,876 339,446 (22,667)
Net income(loss) per share .46 .02 (.03)
Number of shares used in computing net
income (loss) per share*
6,623,280 6,398,426 6,398,426
</TABLE>
- - --------------------------------------------
* See Note A of Notes to Financial Statements for an explanation of
the computation of per share data.
The Company has increased its gross revenues in each of the past three
years. Gross revenues of the Company were $1,973,145 in 1994, $7,567,335 in
1995 and $40,724,515 in 1996.
The rapid increase of gross revenues for the Company from 1994 to 1996
is due to a variety of factors including, the dramatic increase in the frequency
of various seminars, the significant increase in fees for the seminars, the
establishment of the Wall Street Workshop program, the development of WIN, the
sales of the book, "Wall Street Money Machine," and the introduction of two new
seminars.
The average retail price of the seminars have generally increased 73%
from 1994 to 1995 and 25% from 1995 to 1996. Wall Street Workshop was increased
from $780 in 1994 to $1,677 in 1995 and $2,195 in 1996. Wealth Academy increased
from $1,950 in 1994 to $2,206 in 1995 to $3,286 in 1996. The fee for the WIN
bulletin board service increased from $495 in 1994 to $1,995 in 1995 and $2,995
in 1996. The fee increase allowed the Company to focus its resources to develop
and increase market and
15
<PAGE> 16
research support for its web site. In fiscal 1997, the Company does not
anticipate any significant changes in the fee structure for any of its programs.
The Company has increased the frequency of Wall Street Workshops from
two per month in 1995 to two per week in early 1996, to five times per week in
early 1997. The Company will attempt to continue increasing the number and
frequency of seminars that the Company offers.
Net Sales. The net income for the Company for the past three fiscal
years was net loss of $195,730 for 1994 to a net profit of $123,798 in 1995 and
$3,064,639 in 1996. This represents an increase of $319,528, or 163% from 1994
to 1995 and $2,940,841, or 2376% from 1995 to 1996. It should be noted that the
reorganization of Profit occurred on May 18, 1995, and the losses carried by
Profit for the first four and one-half months of 1995 affected the profit and
loss margin for the Company. The management of the Company anticipates strong
growth in fiscal 1997, however, there can be no assurances.
Cost of Sales. Although the direct costs of staffing the individual
seminars, workshops, or financial clinics as a percentage of net sales have
remained relatively stable over the past three years, the total cost has
increased to correspond with the increase in the number seminars, workshops and
financial clinics provided by the Company. From 1994 to 1995, costs went from
$861,784 to $3,373,888, which is an increase of $2,512,104 or 292%, and from
1995 to 1996, costs went from $3,373,888 to $15,682,936, which is an increase of
$12,309,048 or 365%.
The seminar business is not generally seasonal in nature although the
Company experiences somewhat slower participation rates during July and August.
16
<PAGE> 17
Liquidity and Capital Resources
Since the acquisition of WCSI in 1995, the Company has financed its
operations primarily through cash flow from operations. At December 31, 1996,
1995 and 1994, respectively, the Company had cash and cash equivalents of
$635,141, $26,840, $100, respectively. Total assets increased from $594,216 in
1994 to $2,283,055 in 1995 to $16,937,659 in 1996 and total liabilities
increased from $184,967 in 1994 to $1,458,352 in 1995 to $12,618,335 in 1996.
Although no assurances can be given, the Company does not anticipate any trends
which will materially increase or decrease its current level of liquidity.
In the past, the Company had the opportunity to increase its liquidity
by its investment strategies in the purchasing and selling of marketable
securities. The investment in marketable securities will need to continue for
teaching purposes with respect to each Wall Street Workshop. In addition, the
Company anticipates it will maintain or increase its current level of investment
in marketable securities in the future. The Company may channel some of the
liquidity of its investment portfolio into real estate limited partnerships that
are purchasing hotels or motels or underlying real property to construct such
hotels, to making investments in venture capital limited partnerships or other
less liquid investments or paying down underlying debt attached to its corporate
headquarters. See "Business-Real Estate and Other Investments".
The current monthly payments for the outstanding loan for the corporate
headquarters of $50,000 per month will increase on September 1, 1997 to $100,000
per month, until February 1, 1999. The contract allows the Company to make lump
sum prepayments on January 1, or July 1, in increments of $100,000 but not more
than $500,000. The Company may make a prepayment of $500,000 on July 1, 1997.
There is no prepayment penalty.
Except for the mortgage on its corporate headquarters, the Company
currently does not access external sources of liquidity and the management of
the Company does not currently expect to access external sources of liquidity in
the immediate future.
The Company has material commitments for its various hotel or motel
development projects. The Real Estate Subsidiaries have long term or short term
debt payments for various hotel and motel development projects that will affect
the Company's liquidity in 1997. These include monthly payments of $10,430 and a
down payment of $25,000 for its 8.8% ownership of Park City Hotel Partners,
Limited Partnership, by WCSI; $690,000 payment for 51% ownership of FSS, Limited
Partnership; $590,000 for 51% ownership of Reno F.I.S., Limited Partnership;
$3,450,000, including payments of $1,400,000 in 1997 as well as monthly payments
of approximately $16,000 for 100% ownership of Rising Tide, Limited Partnership.
The anticipated source of revenue to meet these commitments will be from
operational revenue and investment portfolio growth. The management of the
Company believes that some revenue may be generated through income from the
limited partnerships owning the hotels/motels if occupancy increases in late
1997 and early 1998. However, these expectations may not be met if the
investment portfolio held by the Company experiences little growth or a
diminution in value or if the existing trend of increased occupancy in
hotel/motels adversely changes.
The liquidity of the Company may be impaired in the event the
underlying loans wrapped by Rising Tide, Limited Partnership, a subsidiary of
the Company, are called by the lenders. Rising Tide, Limited Partnership assumed
the debt from East Bay Associates, LLC for two outstanding loans from
17
<PAGE> 18
The Bank of Utah in the amount of approximately $790,000 and a business loan, in
the amount of approximately $790,000. Both loans may be accelerated at any time,
creating a cash flow risk for the Company and reducing the ability of the
Company to continue its investment strategies in purchasing hotels. Although
there can be no assurances that the loans will not be accelerated, the
management of the Company does not anticipate the loans will be accelerated and
has structured the wrap around assumption package to pay off the debt. In
addition, the hotel owned by Rising Tide Limited Partnership is operational and
producing a current income stream. The income stream from Rising Tide may be
used to minimize the impact that the acceleration of the loans would have on the
liquidity of the Company.
The major expenses for the completion of the remodeling and
refurbishing of the corporate headquarters will be completed by the summer of
1997. The Company purchased, in cash, all the office furniture, office
equipment, and office art in past fiscal year and the first quarter of 1997. The
Company does not anticipate any significant expenses exceeding $250,000 for its
corporate headquarters in 1997.
The Company's current financial resources and estimated cash flow from
operations are expected to provide adequate capital to fund the Company's
operations, including its various real estate development projects, for the
foreseeable future.
The Company has unused sources of liquid assets in a stock market
portfolio estimated at $5 million which the Company will seek to invest in
various vehicles. See "Business - Real Estate and Other Investments".
Other Matters
Inflation did not have a significant impact on the Company's operations
in fiscal 1996, 1995 and 1994.
ITEM 3. PROPERTIES.
The Company's headquarters are located in a three-story, 63,000 square
foot office building in Seattle, Washington. The Company purchased the building
in 1996, and believes that the facility is adequate for the Company's needs for
the foreseeable future. The headquarters building houses the management and
sales staff of Profit, together with its subsidiaries WCSI, Left Coast,
Lighthouse Publishing and RE Management. The headquarters building also contains
three seminar rooms at which the Company conducts seminars for the Seattle
metropolitan area. The Company leases approximately 29,000 square feet of
warehouse space in Tukwila, Washington where it stores and ships audio tapes,
video tapes, books and other printed materials. The lease for such space expires
in April 2000.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of June 24, 1997 for (i)
each executive officer of the Company; (ii) each director of the Company; (iii)
all executive officers and directors of the Company as a group; and (iv) each
person known by the Company to be the beneficial owner of more than five percent
of the Common Stock:
18
<PAGE> 19
<TABLE>
<CAPTION>
Beneficial Owner(1) Shares Beneficially % of Outstanding
Owned(2) Stock(3)
-------- --------
<S> <C> <C>
Officers and Directors:
Wade B. Cook(4)...........................................................4,138,540 60.1%
Andrew T. Rice....................................................................0 *
Laura M. Cook(5)..........................................................4,138,540 60.1%
Cheryle Hamilton................................................................140 *
Robert T. Hondel.............................................................20,140 *
Dr. Warren H. Chaney..............................................................0 *
John V. Childers(6)..........................................................20,140 *
Nicholas Dettman..................................................................0 *
Eric W. Marler(7)............................................................20,500 *
All executive officers and directors of the 4,181,460 60.4%
Company as a group (9 persons).........
Non-management 5% Stockholders:(8)
Yeaman Enterprises, Inc.(6)
3098 S. Highland Drive, Suite 460
Salt Lake City, Utah 84106..............................................741,813 13.7%
Wade B. Cook and Laura M. Cook
Family Trust(7).......................................................2,800,000 41.9%
</TABLE>
- - -------------------------------------------------------------------------------
*........Represents beneficial ownership of less than 1% of the
outstanding shares of the Common Stock
(1) Unless otherwise indicated, the address of the beneficial owner is c/o
Profit Financial Corporation, 14675 Interurban Avenue South, Seattle,
Washington 98168-4664.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to stock options and warrants currently exercisable or
exercisable within 60 days are deemed to be outstanding for calculating
the percentage ownership of the person holding such options and the
percentage ownership of any group of which the holder is a member, but
are not deemed outstanding for calculating the percentage of any other
person. Except as indicated by footnote, and except for voting or
investment power held jointly with a person's spouse, the persons named
in the table have sole voting and investment power with respect to all
shares of capital stock shown beneficially owned by them.
(3) Percentage is calculated based upon 6,680,864 shares of Common Stock
outstanding on June 24, 1997.
(4) Includes (a) 938,540 shares owned by Mr. Cook, (b) 200,000 shares owned
by the Wade Cook Family Trust, a trust established for the benefit of
Mr. and Mrs. Cook's family, (c) 200,000 shares of Common Stock subject
to immediately exercisable option to exercise options held by Yeaman
Enterprises Inc., and (d) shared voting and investment power over
2,800,000 shares of Common Stock owned by the Wade B. Cook and Laura
M. Cook Family Trust, a trust established for the benefit of Mr. &
Mrs. Cook's family. Wade B. Cook and Laura M. Cook are husband and
wife. All shares held by Mr. Cook are held as community property.
(5) Includes shared voting and investment power over 2,800,000 shares of
Common Stock owned by the Wade B. Cook and Laura M. Cook Family Trust,
Wade B. Cook and Laura M. Cook are husband and wife. Also includes
1,338,540 shares or options owned by Mr. Cook or by the Wade Cook
Family Trust, as to which Mrs. Cook disclaims beneficial ownership.
All shares held by Mrs. Cook are held as community property
(6) Includes 20,000 shares subject to exercisable options.
(7) Includes 2500 shares subject to an immediately exercisable option and
200,000 shares subject to option to purchase immediately exercisable
options.
(8) These shares of Common Stock are held in a Custodial Trust Account at
Yeaman Enterprises, Inc. for the benefit of Mr. Yeaman's family. Mr.
Yeaman disclaims beneficial ownership for such shares. Includes
options to acquire 100,000 shares of common stock on July 31, 1997 and
100,000 shares on August 31, 1997
19
<PAGE> 20
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth certain information as of June 21, 1997
concerning each of the directors, executive officers and other senior officers
of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Wade B. Cook 47 President and Chairman of the Board
Andrew T. Rice 40 Treasurer and Controller
Laura M. Cook 44 Secretary and Director
Cheryle Hamilton 45 Director of Lighthouse Publishing
Robert T. Hondel 54 General Sales Manager of WCSI
Dr. Warren H. Chaney 54 Director
John V. Childers 52 Director
Nicholas Dettman 49 Director
Eric W. Marler 39 Director
</TABLE>
Wade B. Cook has been the Chairman of the Board and the President since
June, 1995. Mr. Cook also served as Treasurer and President of WCSI since 1989.
Mr. Cook is an internationally recognized author of 15 books on finance, real
estate, asset protection and the stock market, and trainer and speaker on these
topics, and the developer of educational products on investing and personal
wealth management. Mr. Cook is the husband of Laura M. Cook.
Andrew T. Rice has been Treasurer and Controller for the Company since June
1997. Prior to his involvement with the Company, Mr. Rice was Controller for
Cosmos Development and Administration Corp. a major real estate development
company based in Bellevue, Washington.
Laura M. Cook has been the Secretary and a member of the Board of Directors
of the Company since May 1995. Mrs. Cook has also served as an officer and
operational manager in several subsidiaries of the Company. Mrs. Cook has also
managed accounting systems for various corporations for 15 years. Mrs. Cook is
the wife of Mr. Cook.
Cheryle Hamilton has been the Director of Lighthouse Publishing since
October, 1996. From March, 1996 to February, 1997, Ms. Hamilton served as Human
Resources Director for the Company. Prior to her involvement with the Company,
Ms. Hamilton was Executive Assistant of Sunsportswear, Inc., a clothing
manufacturer located in Seattle, Washington. She also provided intellectual,
property and marketing consulting on a contract basis from 1991 to 1994.
Robert T. Hondel is the General Sales Manager of WCSI. Mr. Hondel left
retirement to join the Company. Prior to joining the Company, Mr. Hondel spent
18 years as the Director and President of the Knapp College of Business in
Tacoma, Washington. Mr. Hondel is Ms. Anderson's uncle.
Dr. Warren H. Chaney has served on the Board of Directors since July
1996. Since 1980, Dr. Chaney has been involved in the motion picture and
television industry as writer, director and producer for projects originating
from Paige-Brace Cinema, Ltd., Lorimar Films, TMS, Inc., Skorris Films Inc.,
Sandpiper Productions, Inc., Leading Edge Entertainment, Inc., Warren Chaney
Productions, Ind., Intercontinental Releasing Corporation, and Millennial
Entertainment.
20
<PAGE> 21
John V. Childers has been a member of the Board of Directors since
August 1995. In addition to his duties as Director, Mr. Childers acts as a
Speaker Trainer of the Company. Prior to his association with the Company, Mr.
Childers was the Chairman and President of Ideal Travel Concepts, a travel
company with locations in Tennessee and Florida.
Nicholas Dettman has been a member of the Board of Directors since May,
1995. He is a captain of Delta Airlines, located in Atlanta, Georgia for over 30
years. He is the owner and operator of Kalowai Plantation, a orchid ranch in
Kauai, Hawaii.
Eric W. Marler has been a Director since December 1996 and has been a
speaker for the Company since September 1996. Mr. Marler also served as Chief
Financial Officer of the Company from December 1996 to June 1996. Mr. Marler is
Vice President of Cascade Management Associates LP, a firm that provides tax
consulting. Prior to his involvement with the Company, Mr. Marler practiced as a
Certified Public Accountant giving advice on income tax and profitability
planning with Martin/Grambush, P.C., an accounting firm located in Kirkland,
Washington.
Board of Directors
Directors of the Company are elected by the Company's shareholders and
hold office until the next annual meeting of shareholders and until their
successors are elected and qualified, or until their earlier resignation or
removal. The Company's officers serve at the discretion of the Board of
Directors.
No director that is an employee of the Company is compensated for
services as a member of the Board of Directors or for services on any committee
of the Board of Directors. Compensation for non-employee directors consists of a
retainer of $500 dollars per year. Compensation for all non-employee directors
also consist of a fee varying from $25 to $125 depending on the length of the
meeting for each board meeting and committee meeting attended in person or by
telephone. Directors are reimbursed for reasonable travel and out-of-pocket
expenses incurred on behalf of the Company. During the fiscal year ending
December 31, 1996, the Company did not have a compensation committee. All
matters concerning executives compensation were addressed by Mr. Cook. The
Company is planning to implement a compensation committee and an audit committee
later this year.
Involvement in Legal Proceeding
The State of Arizona commenced an administrative proceeding against
Wade B. Cook and his former businesses American Business Alliance and Monarch
Funding Corporation in February, 1989. The State of Arizona issued an
administrative order, on or about May 1989, concluding that Mr. Cook and his
businesses had violated various securities laws, including anti-fraud
provisions, and as a result, ordered them to (1) pay over $390,000 in
restitution (2) jointly and severally pay a $150,000 administrative penalty, and
(3) to cease and desist the allegedly fraudulent conduct. Mr. Cook is currently
in the process of negotiating the treatment of this proceeding.
The U.S. Securities and Exchange Commission has commenced a private
formal investigation against the Company and certain of its officers and
directors, including Mr. Cook. In addition, the Securities Division of the State
of Washington has commenced an informal investigation of Mr. Cook,
21
<PAGE> 22
together with WCSI and the Company. The Company does not believe it or any of
its officers engaged in any inappropriate activity or violated applicable laws.
See "Legal Proceedings".
Employment Agreements
Pursuant to an Employment Agreement, dated as of June 25, 1997 and
effective as of July 1, 1997, Mr. Cook will be employed as Chief Executive
Officer and President of the Company. The Employment Agreement provides for a
three-year term in which Mr. Cook will receive an annual base salary of $240,000
in Year 1, $265,000 in Year 2 and $290,000 in Year 3 and additional incentive
compensation if certain performance targets are met. In addition, Mr. Cook is
entitled to reimbursement for reasonable travel and business entertainment
expenses authorized by the Company, as well as certain fringe benefits.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth information regarding employee
compensation paid for all services rendered to the Company in all capacities
during fiscal 1996 by the Company's Chief Executive Officer, (one current
executive officer and one former executive officer). No other executive officers
of the Company received in excess of $100,000 during the last fiscal year.
<TABLE>
<CAPTION>
Annual Compensation
Name and Position Salary Bonus Other Long Term All Other
- - ----------------- ------ ----- ----- --------- ----------
(3) Compensation Compensation(1)
----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Wade B. Cook, $90,628 none none none (2)
President and Chairman,
Chief Executive Officer
Robert T. Hondel, $180,069 $1,000 --- none ---
General Sales Manager
Christopher Carde (4) $222,550 $1,500 none none ---
Former General Counsel, CEO
and Director
Margaret Huss
Sales Representative $127,459 $38,803 none none ---
Barry Collett $9,652 $125,541 none none ---
Sales Representative
</TABLE>
- - ------------------------------
(1) Certain of the Company's executive officers received personal
benefits in addition to salary and cash bonuses, including car
allowances or the use of a car owned by the Company and mortgages at
market rates. The aggregate amount of such personal benefits however,
do not exceed the lessor of $50,000 or 10% of the total of the annual
salary and bonus reported for the named executive officers.
22
<PAGE> 23
(2) Royalties are also paid by WCSI indirectly to Mr. Cook pursuant to a
Product Agreement. See "Certain Relationships and Related
Transactions."
(3) All employees of the Company have received a small number of shares
from time to time as a bonus in exceeding certain sales expectations.
(4) Mr. Carde's employment was terminated on May 7, 1997.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company had a Product Agreement on January 3, 1993 with Money Chef
setting forth certain terms for the right to use the name and products. The
royalty payments paid to Money Chef under the Product Agreement ranged from 10%
to 50% of gross sales (as defined in the Product Agreement). In fiscal 1995 and
1996, the Company was generally required to pay Money Chef 10% to 30% of gross
sales, with Money Chef having the right to specify the percentage within the 10%
to 50% range that the Company must pay. Money Chef has opted to receive the
minimum amount of royalties of 10% in each of fiscal 1996 and 1995. The Company
paid royalties of $4,366,183 in 1996 and $755,550 in 1995 and $82,923 in 1994.
On June 26, 1997, Wade Cook Seminars, Inc. renegotiated the Product
Agreement for an additional period through June 30, 2002 for a flat royalty of
10% of gross sales. Mr. Cook does not have an "outputs contract" with the
Company and so the Management of the Company can not guarantee that all future
products created by Mr. Cook will be licensed by the Company under the terms of
the Product Agreement.
The royalty payments paid to Money Chef under the Product Agreement
ranged from 10% to 50% of gross sales (as defined in the Product Agreement). In
fiscal year 1995 and 1996, the Company was generally required to pay Money Chef
10% to 30% of gross sales, with Money Chef having the right to specify the
percentage within the 10% to 50% range that the Company must pay. Money Chef has
opted to receive the minimum amount of royalties of 10% in each of fiscal pay.
Money Chef has opted to receive the minimum amount of royalties of 10% in each
of fiscal 1996 and 1995.
The Company has licensed the rights to Mr. Cook's books, Real Estate
Money Machine, Wall Street Money Machine, Stock Market Miracles, Bear Market
Baloney, and Business Buy the Bible under individual Publishing Agreements with
Lighthouse Publishing Group, Inc., (a subsidiary). Under the terms of each of
the book licenses, Mr. Cook is paid a royalty of ten percent (10%) of the retail
price of each book sold.
Scott Scheuerman, who is the brother-in-law of Mr. Cook, is president
of BOSS, Inc. and Acorn Corporate Services, Inc. which are Nevada corporations
operating out of Nevada. Acorn acts as resident agent for Nevada corporations
and BOSS provides corporate services for Nevada corporations operating in
Nevada. The Company markets these services and sells the processing of Nevada
corporations. Clients of USA that purchased either/or both Acorn resident agent
services or BOSS services increased from 600 in 1994 to 1,120 in 1995 and 1,360
in 1996.
23
<PAGE> 24
Evergreen Lodging, L.P., a Nevada limited partnership ("Evergreen")
which is an indirect subsidiary of the Company, has loaned approximately
$275,000 to Cross Roads, L.P., a limited partnership of which Mr. Cook serves as
the president of the general partner of the partnership. The indebtedness is
evidenced by a Secured Demand Note dated February 7, 1996 in the original
principal amount of $25,000 and a Secured Demand Note dated August 30, 1996 in
the original principal amount of $250,000, each payable to Evergreen and
executed by Cross Roads, L.P.
WCSI has loaned approximately $125,000 to Newstart Centre, Inc., a Utah
corporation related to the Company. The indebtedness is evidenced by a
Promissory Note (Secured) dated February 4, 1997 in the original principal
amount of $125,000 payable to WCSI and executed by Newstart Centre, Inc. and a
Secured Loan Agreement dated February 4, 1997 by and between WCSI and Newstart
Centre, Inc.
In 1995, the Company entered into an agreement with Associated
Reciprocal Traders, Ltd. ("ART") to purchase 20,000 Investor
Relations-Advertising-Infomercial radio air time spots, priced at $25 per ad
spot, per station, for a sum total of $500,000. In payment of the foregoing, the
Company issued 100,000 shares of Common Stock to ART in January 1996.
Eric W. Marler, the former Chief Financial Officer of the Company and a
current Director and a speaker in its educational seminars, is the owner of 50%
of the issued shares of Cascade Management Associates, L.P. ("Cascade"). Cascade
provides seminar speaking services for a fee of $10,000 per month to USA since
September 1996.
The Company, through Profit or its subsidiaries, is the payee under
numerous secured notes, the vast majority of which are secured, bearing varying
interest rates in the aggregate amount of approximately $1,700,000 as of January
31, 1997. These loans include several loans to purchase homes and cars for
employees of the Company
The Company obtained services from seminar speakers provided by
companies owned by officers and other significant employees of the Company.
Total speaker fees paid to such companies totaled $131,337 for the year ended
December 31, 1996 and none for years 1995 and 1994. There were no additional
amounts due to such companies as of December 31, 1996.
John V. Childers, a director of the Company, contracts with WCSI
through Speaker Services, Inc., a private corporation, to train all speakers for
all events produced by WCSI. The agreement sets forth a compensation plan of one
percent (1%) of the gross of all Financial Clinic seminars, and one-half percent
(0.5%) of the gross of all Wall Street Workshops.
Additionally, Mr. Childers is the president of Ideal Travel Corporation
("Ideal"), and WCSI utilizes Ideal as well as other travel agencies in the
planning of its corporate travel. As a result of the corporate working
relationship between Ideal and WCSI, Mr. Cook receives a minimal appropriation
fee of five percent (5%) from Ideal on all travel initiated by WCSI.
Paul Cook, Mr. Cook's brother, contracts with WCSI to provide speaking
services. Paul Cook executed a loan from WCSI on June 18th, 1997 for a total of
seventy-five thousand dollars ($75,000) for a two-year period at the interest
rate of 11 percent (11%). The loan is secured by a second position on Mr. Cook's
home in Salt Lake City, Utah.
24
<PAGE> 25
Crossroad Northwest, LP, a limited partnership controlled by the Wade
B. Cook Family Trust owes $637,401 under a secured note.
ITEM 8. LEGAL PROCEEDINGS.
The following is a description of material pending legal proceedings to
which the Company or any of its subsidiaries is a party or which any of their
properties is subject:
Investigation by the U.S. Securities and Exchange Commission
The Company and certain of its executive officers have received
subpoenas to provide certain information in the Matter of Wade Cook Seminars, a
private informal investigation by the Securities and Exchange Commission
("SEC"). The investigation relates to the possible violation of Sections 5(a),
5(c) and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule
10b-5 thereunder, and Sections 203(a) and 206(1) and (2) of the Investment
Advisers Act. The SEC has stated that the investigation should not be construed
as an indication by the SEC or its staff that any violations of law have
occurred, nor should it be construed as an adverse reflection on the merits of
the securities involved or on any person or entity. The Company does not believe
it or any of its executive officers and directors has engaged in any
inappropriate activity or violated applicable laws, and the Company intends to
continue to cooperate with the investigation. No assurance can be given as to
the outcome of this investigation.
Informal Investigations by the State of Washington
The Assistant Attorney General for the State of Washington's Department
of Financial Institutions, Securities Division commenced an informal
investigation of Mr. Cook, WCSI and the Company in September, 1996. The
Assistant U.S. Attorney for the Western District of Washington issued a subpoena
to WCSI in March 1997 for records related to an independent contractor of the
Company. Although the breadth and nature of these two investigations are not
known, the Company does not believe it or any of its executive officers and
directors has engaged in any inappropriate activity or violated applicable laws
and the Company intends to continue to cooperate with the investigation. No
assurances, however, can be given as to the outcome of these investigations.
Wade Cook Seminars, Inc. v. Charles Mellon, et al.
The Company brought a suit against defendants Robbins Research
International and Charles E. Mellon in the King County Superior Court on
September 16, 1996 and joined Anthony Robbins and Options Management, Inc. in
June 1997. The Company alleges breach by Mellon of a noncompete agreement and
unfair competition and inducement to breach the noncompete by Robbins Research
and Anthony Robbins in hiring Mellon to present a copy of the Company's Wall
Street Workshop seminar on behalf of defendants. An injunction in favor of WCSI
was granted October 9, 1996 and attorney fees were awarded to the plaintiffs
against Mr. Mellon. The trial is currently scheduled for September 1997.
Wade B. Cook v. Anthony Robbins and Robbins Research International, Inc.
The Company brought suit in United States District Court, Western
District of Washington, against Tony Robbins and Robbins Research International,
Inc. on June 18, 1997 for damages and
25
<PAGE> 26
injunctive relief for copyright infringement. The Company alleges Tony Robbins
copied or caused to be copied significant portions of Wall Street Money Machine,
authored by Wade B. Cook, and used these materials in a course entitled
"Financial Power."
Other Proceedings
The Company and its subsidiaries are also parties to various
administration actions and other legal proceedings arising in the ordinary
course of business, none of which is expected to materially affect the financial
position, results of operation or cash flow of the Company.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
Although there is currently no established trading market for shares of
Common Stock of the Company, the Company's Common Stock is quoted under the
stock symbol "PFNL" in the over-the-counter market. At June 20, 1997, there were
four market makers of the Company's Common Stock.
The following table sets forth the approximate high and low bid
quotations for the Company's Common Stock for the calendar periods indicated.
The quotations reflect inter-dealer prices retail markups, markdowns or
commissions and may not reflect actual transactions.
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C> <C>
1997
----
Quarter Ended March 31 $3.00 $2.88
April 1 to June 20 $5.25 $2.50
1996
----
Quarter Ended March 31 2.12 2.00
Quarter Ended June 30 2.62 2.25
Quarter Ended September 30 3.75 3.50
Quarter Ended December 31 3.12 2.62
1995
----
Quarter Ended March 31 1.75 1.50
Quarter Ended June 30 2.37 2.12
Quarter Ended September 30 2.50 2.25
Quarter Ended December 31 2.00 1.87
1994
----
Quarter Ended March 31 1.87 1.62
Quarter Ended June 30 1.75 1.50
Quarter Ended September 30 1.75 1.50
Quarter Ended December 31 1.75 1.50
</TABLE>
The high and low bid quotation price for the Common Stock on June 20, 1997
was $5.25 and $4.63, respectively. As of June 20, 1997, the Company had
approximately 6,680,000 shares of Common Stock outstanding.
As of June 20, 1997, there were approximately 924 record holders of Common
Stock.
26
<PAGE> 27
The Company has never paid any cash dividends on its Common Stock and does
not anticipate that it will pay dividends in the foreseeable future. Instead,
the Company intends to apply any earnings to the expansion and development of
its business.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On June 28, 1996, the Company authorized 16,000 shares of its Common Stock
at $3 per share to five employees for subscription notes receivable. In
addition, on June 28, 1996, the Company authorized 30,420 shares of its Common
Stock at $2.50 per share to various employees as additional employee
compensation. The stocks were issued in January 1997. Each negotiated
transaction was made in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act") as
isolated transactions to a single investor which did not involve a public
offering.
On June 28, 196, the Company issued 10,000 shares of its common Stock at
$30 per share to Paradise Funding. This transaction was made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act as an
isolated transaction to a single investor and it did not involve a public
offering.
On January 31, 1996, the Company issued 100,000 shares of Common Stock to
Associated Reciprocal Traders, Ltd. in payment of an agreement to purchase
20,000 Investor Relations-Advertising-Infomercial radio air time spots, priced
at $25 per ad spot, per station, for a sum total of $500,000. The negotiated
transaction was made in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act as isolated transactions to a few limited
investors which did not invoke a public offering.
On January 1, 1995, the Company transferred its ranching operations in
Uintah County, Utah to Four Star, Inc. in exchange for all of Four Star's
outstanding common stock pursuant to a plan of reorganization under section
368(a)(1)(D) of the Internal Revenue Code. All of Four Star's stocks were then
distributed to Yeaman Enterprises, Inc. in exchange for 1,880,00 shares of the
Company's stock as part of the reorganization on April 1, 1995. The negotiated
transaction was made in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act as isolated transactions to a single investor
which did not invoke a public offering. See "Business-Prior Business History."
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The Company's authorized stock consists of 20,000,000 shares of Class A
Common Stock, par value .01 per share ("Common Stock"), and 5,000,000 shares of
Preferred Stock, par value $10 per share ("Preferred Stock"). As of June 15,
1997, there were outstanding approximately 6,680,000 shares of Common Stock and
no shares of Preferred Stock outstanding. All of the currently outstanding
shares of Common Stock are validly issued, fully paid, and non-assessable.
On August 6, 1996, the Board of Directors declared a two-for-one stock
split on the Company's Class A Common Stock, effected in the form of a stock
dividend to shareholders of record on July 15, 1996. The number of shares issued
at September 10, 1996 after giving effect to the split was 6,650,442
27
<PAGE> 28
common shares (3,325,211 common shares before the split). The effects of the
stock split are accounted for in all shares and per share data included in this
Registration Statement.
Common Stock
The holders of Common Stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, the holders of a majority of the stock entitled to vote in
any election of directors may elect all of the directors nominated for election.
Subject to preferences that may be applicable to any then outstanding Preferred
Stock, the holders of Common Stock will be entitled to receive such dividends,
if any, as may be declared by the Board of Directors from time to time out of
legally available funds. Upon liquidation, dissolution, or winding up of the
Company, the holders of Common Stock will be entitled to share ratably in all
assets of the Company that are legally available for distribution, after payment
of all debts and other liabilities and subject to the prior rights of holders of
any Preferred Stock then outstanding. The holders of Common Stock have no
preemptive, subscription, redemption, or conversion rights. The rights,
preferences, and privileges of holders of Common Stock will be subject to the
rights of the holders of share of any series of Preferred Stock that the Company
may issue in the future.
The authorized Preferred Stock of the Company is available for issuance
from time to time at the discretion of the Board of Directors of the Company
without stockholder approval. The Board of Directors have the authority to
prescribe, for each series of Preferred Stock it establishes, the number of
shares in that series, the consideration for such shares in that series and the
designations, powers, preferences and relative, participating, optional or other
special rights, and such qualifications, limitations or restrictions on the
shares in that series. Depending upon the rights of such Preferred Stock, the
issuance of Preferred Stock could have a material adverse affect on the holders
of Common Stock by delaying or preventing the change in control of the Company,
making removal of the present management of the Company more difficult or
resulting in restrictions upon the payment of dividends and other distributions
to the holders of Common Stock. The management of the Company currently has no
plans to issue any shares of any class or series of its Preferred Stock.
Dividend Policy
The Company has never paid any cash dividends on its Common Stock and does
not anticipate that it will pay dividends in the foreseeable future. Instead,
the Company intends to apply any earnings to the expansion and development of
its business.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is National Stock
Transfer in Salt Lake City, Utah.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company does not have any provision in its charter, by-laws, or other
contracts providing for indemnification of its officers and directors.
The Utah Business Corporation Act, however, generally provides that a
corporation may indemnify an individual made a party to a proceeding because he
is or was a director, officer, employee,
28
<PAGE> 29
fiduciary or agent of the corporation, against any liability incurred in the
proceeding if (i) the individual's conduct was in good faith, (ii) the
individual reasonably believed that his conduct was in, or not opposed to, the
corporation's best interests, and (iii) in the case of any criminal proceeding
he had no reasonable cause to believe his conduct was unlawful; provided,
however, that (x) in the case of an action by or in the right of the
corporation, indemnification is limited to reasonable expenses incurred in
connection with the proceeding and (y) the corporation may not, unless
authorized by a court of competent jurisdiction, indemnify an individual (A) in
connection with a proceeding by or in the right of the corporation in which the
individual was adjudged liable to the corporation, or (B) in connection with any
other proceeding in which the individual is adjudged liable on the basis that he
derived an improper personal benefit. In a judicial proceeding under the
foregoing clause (y), in order to authorize indemnification the court must
determine that the individual is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances. A director or officer
is entitled to mandatory indemnification if he was successful, on the merits or
otherwise, in the defense of any proceeding, or in the defense of any claim,
issue or matter in the proceeding, against the reasonable expenses incurred by
him in connection with the proceeding or claim with respect to which he was
successful. A corporation may also indemnify and advance expenses to an officer,
employee, fiduciary or agent to a greater extent if not inconsistent with public
policy and if provided for by the articles of incorporation, by-laws, general or
specific action of its board of directors or contract.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The audited consolidated financial statements for the Company for the
fiscal years ended December 31, 1996, 1995 and 1994, and the report thereon and
the related financial statements, schedules and reports thereon, are set forth
below, beginning on page F-1.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
On February 6, 1997, the Company engaged Miller and Company, an accounting
firm based in Santa Monica, California to act as its independent certified
public accountants and to audit the Company's financial statements for the
fiscal years ended December 31, 1995 and 1996. The Company terminated its
relationship with Smith and Company, an accounting firm based in Salt Lake City,
Utah on May 1, 1995 upon the completion of the merger of a subsidiary of the
Company with WCSI. With respect to the financial statements for the years ended
December 31, 1994, the report of Smith and Company did not contain an adverse
opinion or a disclaimer of opinion and were not modified or qualified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was recommended and approved by the Board of Directors of the
Company. There were no disagreements with Smith and Company on accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure related to the Company.
29
<PAGE> 30
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<CAPTION>
(a) Financial Statements. Page
----
<S> <C> <C>
Years Ended December 31, 1996, 1995 and 1994 F-1
Report of Independent Certified Public Accountants F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets F-2
Consolidated Statements of Income and Retained Earnings F-4
Consolidated Statement of Changes in Shareholders' Equity F-5
Consolidated Cash Flow Statements F-6
Report of Independent Certified Public Accountants F-20
FINANCIAL STATEMENT SCHEDULES:
Schedule 1 - Consolidated Financial Information of Registrant F-21
</TABLE>
(b) Exhibits Index.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
3.1(a)* Articles of Incorporation of Profiteer Corporation
3.1(b)* Amendment to Articles of Incorporation of Profiteer Corporation dated
September 2, 1984
3.1(c)* Amendment to the Articles of Incorporation of Profiteer Corporation
dated August 10, 1988
3.1(d) Amendment to the Articles of incorporation of Profiteer Corporation
dated September 10, 1991
3.2* Bylaws of Profiteer Corporation
4.1** Form of Company's Class A Common Stock Certificate
10.1(a) Product Agreement, dated January 3, 1993 between United Support
Association, Inc. as the purchaser, and Money Chef Inc., previously
known as USA/Wade Cook Seminars, Inc. as the seller.
10.1(b)** Product Agreement, dated June 25, 1997 and effective as of July 1,
1997, among Wade Cook Seminars, Inc., Money Chef and Wade B. Cook.
10.2* Agreement dated May 18, 1995 by and among Profit Financial Corporation,
Yeaman Enterprises, Inc., Four Star Ranch, Inc., United Support
Association, Inc. and Wade B. Cook.
10.3(a)* Agreement dated February 1, 1996 between Wade B. Cook and Lighthouse
Publishing Group, Inc. (for Wall Street Money
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
Machine)
10.3(b) Amended Agreement, dated June 26, 1997 between Wade B. Cook and
Lighthouse Publishing Group, Inc. (For Wall Street Money Machine)
10.4(a)* Agreement dated January 1, 1997 between Wade B. Cook and Lighthouse
Publishing Group, Inc. (for Stock Market Miracles)
10.4(b) Amended Agreement dated June 26, 1997 between Wade B. Cook and
Lighthouse Publishing Group, Inc. (for Stock Market Miracles).
10.5 Agreement dated March 1, 1997 between Wade B. Cook and Lighthouse
Publishing Group, Inc. (for Bear Market Baloney)
10.6 Agreement dated May 1, 1997 between Wade B. Cook and Lighthouse
Publishing Group, Inc. (for Business Buy the Bible)
10.7 Purchase and Sale Agreement, dated July 4, 1996, between United Support
Association and Seller
10.8 Employment Agreement dated June 26, 1997 by and between Wade Cook
Seminars, Inc. and Wade B. Cook.
10.9 Commercial Lease dated June 25, 1997 by and between Wade Cook Seminars,
Inc. and U.S.A. Corporate Services, Inc.
10.10 Agreement, dated November 1, 1996 between Wade B. Cook and Lighthouse
Publishing Group, Inc. (for Real Estate Money Machine)
16.1** Letter re: Change in Certifying Accountant
21.1* List of Profit Financial Corporation Subsidiaries
</TABLE>
-----------------------
* Filed previously.
** To be filed by either by amendment of by a
subsequent filing by the Company.
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated June 27, 1997 PROFIT FINANCIAL CORPORATION
By Wade B. Cook
----------------------------------
Wade B. Cook, President
<PAGE> 33
CONTENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants............................2
Consolidated Balance Sheets...................................................3
Consolidated Statements of Income and Retained Earnings.......................5
Consolidated Statements of Changes in Shareholders' Equity....................6
Consolidated Cash Flow Statements.............................................7
Notes to Consolidated Financial Statements....................................8
Report of Independent Certified Public Accountants...........................21
Schedule 1 - Condensed Financial Information of Registrant...................22
</TABLE>
<PAGE> 34
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Profit Financial Corporation
Seattle, Washington
We have audited the accompanying consolidated balance sheets of Profit Financial
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the years ended December 31, 1996, 1995 and 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Profit
Financial Corporation and subsidiaries as of December 31, 1996 and 1995, and the
results of their consolidated operations and their consolidated cash flows for
the years ended December 31, 1996, 1995 and 1994 in conformity with generally
accepted accounting principles.
In 1995, as described in Note-J to the financial statements, the Company changed
its method of accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of in accordance with the Statement of
Financial Accounting Standards No. 121.
Certified Public Accountants
Santa Monica, California
25 June 1997
<PAGE> 35
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
----------------------------------
CURRENT ASSETS 1996 1995
------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 635,141 $ 26,840
Marketable securities 3,801,039 349,206
Trade and credit card receivables 848,282 129,188
Notes receivable, current portion 329,060 16,452
Notes receivable from officers, current portion 13,191 -
Other receivables 11,378 1,611
Inventory 395,743 46,139
Prepaid expenses 93,196 596
Deferred royalties to related party 48,781 -
Deferred tax asset 783,064 7,340
------------- -------------
TOTAL CURRENT ASSETS 6,958,875 577,372
------------- -------------
PROPERTY AND EQUIPMENT 7,135,205 345,011
------------- -------------
OTHER ASSETS
Non-marketable investments 522,600 1,235,100
Notes receivable 1,385,742 90,452
Notes receivable from officers 236,413 -
Due from related parties 663,401 -
Deposits 35,423 35,120
------------- -------------
TOTAL OTHER ASSETS 2,843,579 1,360,672
------------- -------------
TOTAL ASSETS $ 16,937,659 $ 2,283,055
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 36
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
------------------------------
CURRENT LIABILITIES 1996 1995
- - ------------------- ------------ ------------
<S> <C> <C>
Current portion of long-term debt $ 660,708 $ 77,175
Accounts payable and accrued expenses 976,644 501,560
Margin loans in investment accounts 1,103,936 --
Payroll and other taxes withheld and accrued 807,414 114,090
Income taxes payable 2,075,872 95,200
Deferred revenue 5,160,999 352,325
Royalties payable to related party -- 136,238
Notes payable to related party 19,000 19,000
Notes payable to officer 45,000 45,000
------------ ------------
TOTAL CURRENT LIABILITIES 10,849,573 1,340,588
LONG-TERM DEBT 1,768,762 117,764
------------ ------------
TOTAL LIABILITIES 12,618,335 1,458,352
------------ ------------
MINORITY INTEREST 617,300 295,804
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, 5,000,000 shares authorized
at $10 par value, none issued and outstanding -- --
Class A common stock, 20,000,000 shares
authorized at $0.01 par value, 6,680,864
shares and 3,199,211 shares outstanding as of
December 31, 1996 and 1995, respectively 66,807 31,991
Paid-in capital 1,072,608 498,938
Prepaid advertising (500,000) --
Retained earnings (deficit) 3,062,609 (2,030)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 3,702,024 528,899
------------ ------------
TOTAL LIABILITIES, MINORITY INTEREST,
AND SHAREHOLDERS' EQUITY $ 16,937,659 $ 2,283,055
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 37
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
REVENUES, NET OF RETURNS AND DISCOUNTS $40,724,515 $7,567,335 $1,973,145
COST OF REVENUES:
Royalties to related party 4,366,183 755,500 82,923
Speaker fees to related party 131,337 - -
Other cost of revenues 11,185,416 2,618,388 778,811
----------- ---------- ----------
TOTAL COST OF REVENUES 15,682,936 3,373,888 861,734
----------- ---------- ----------
GROSS PROFIT 25,041,579 4,193,447 1,111,411
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 20,301,703 3,755,001 1,134,078
IMPAIRMENT OF LONG-LIVED ASSETS - 99,000 -
----------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 4,739,876 339,446 (22,667)
----------- ---------- ----------
OTHER INCOME (EXPENSES)
Dividends and interest 60,028 5,547 5,668
Gain (loss) on trading securities 92,711 88,719 (1,616)
Other income 58,513 6,648 1,975
Loss on investment on non-marketable securities - (107,400) (178,200)
Loss on disposition of fixed assets (21,960) - -
Interest expense (263,285) (25,422) (8,770)
----------- ---------- ----------
TOTAL OTHER INCOME (EXPENSES) (73,993) (31,908) (180,943)
----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 4,665,883 307,538 (203,610)
----------- ---------- ----------
PROVISION FOR INCOME TAXES 1,601,244 183,740 (7,880)
----------- ---------- ----------
NET INCOME (LOSS) $ 3,064,639 $ 123,798 $ (195,730)
=========== ========= ==========
EARNINGS (LOSS) PER SHARE $ 0.46 $0.02 $(0.03)
=========== ========= ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,623,280 6,398,426 6,398,426
=========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 38
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class A Common Stock
----------------------------- Additional Retained Total
Paid-in Earnings Prepaid Shareholders
Shares Amount Capital (Deficit) Advertising Equity
------------ ------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances - December 31, 1994 3,199,211 $ 31,991 $ 4,093,794 $ (2,053,257) $ 2,072,528
Reorganization under
section 368(a)(1)(D)
of the Internal Revenue Code (1,880,000) (18,800) (3,578,056) 1,875,057 (1,721,799)
Issuance of common stock in
exchange for WCS stock 1,880,000 18,800 (16,800) 52,372 54,372
Net income for the year
ended December 31, 1995 123,798 123,798
------------ ------------- ------------- ------------- ----------- -------------
Balances - December 31, 1995 3,199,211 $ 31,991 $ 498,938 $ (2,030) $ 0 $ 528,899
------------ ------------- ------------- ------------- ----------- -------------
Issuance of common stock 26,000 260 77,740 78,000
Issuance of common stock in
exchange for prepaid advertising 100,000 1,000 499,000 500,000
Prepaid Advertising (500,000) (500,000)
Effect of 2 for 1 stock split 3,325,231 33,252 (33,252)
Issuance of common stock 30,422 304 75,746 76,050
Subscriptions receivable (45,564) (45,564)
Net income for the year ended
December 31, 1995 3,064,639 3,064,639
------------ ------------- ------------- ------------- ----------- -------------
Balances - December 31, 1996 6,680,864 $ 66,807 $ 1,072,608 $ 3,062,609 $ (500,000) $ 3,702,024
============ ============= ============= ============= =========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 39
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) $ 3,064,639 $ 123,798 $ (195,730)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 344,991 38,816 30,663
(Gains) losses on trading marketable securities (92,711) (88,719) 1,616
Losses on disposition of fixed assets 21,960 -- --
Impairment of long-lived assets -- 99,000 --
Loss on investment in non-marketable securities -- 107,400 178,200
Purchases of trading securities (11,290,111) (1,059,197) (7,293)
Proceeds from sale of trading securities 9,034,925 920,395 --
Changes in assets and liabilities:
Receivables (3,249,764) (144,765) (75,557)
Inventory (349,604) (4,688)
Prepaid expenses (141,381) (597) 1,861
Deferred taxes (775,724) 540 (7,880)
Deposits (303) (29,752) (2,268)
Accounts payable and accrued expenses 475,084 302,305 104,533
Payroll and other taxes withheld and accrued 693,324 60,191 11,332
Income taxes payable 1,980,672 105,200 (10,000)
Deferred revenue 4,808,674 303,133 41,312
Due to related party -- -- (22,958)
Royalties payable (136,238) 177,806 --
------------ ------------ ------------
TOTAL ADJUSTMENTS 1,323,794 787,069 243,561
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,388,433 910,866 47,831
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,729,382) (214,849) (54,051)
Subsidiary's investment (87,500) (1,113,100) --
Return of subsidiary's investment 800,000 -- --
------------ ------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES (4,016,882) (1,327,949) (54,051)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of subsidiary's minority interest 321,496 340,904 --
Short-term borrowings -- 141,175 6,220
Repayment on short-term borrowings (193,232) (38,156) --
Issuance of common stock 108,486 -- --
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 236,750 443,923 6,220
------------ ------------ ------------
NET INCREASE IN CASH 608,301 26,840 --
CASH, beginning of year 26,840 -- --
------------ ------------ ------------
CASH, end of year $ 635,141 $ 26,840 $ --
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 40
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Summary of Significant Accounting Policies
Business
Profit Financial Corporation (PFC) is a holding company, whose
principal operating subsidiaries are Wade Cook Seminars, Inc.
(WCS), formerly known as United Support Association, Inc.,
which was acquired by PFC in 1995, and Lighthouse Publishing
Group, Inc. WCS conducts educational investment and business
seminars and produces video tapes, audio tapes, and written
materials designed to teach various investment and cash flow
strategies for investing in the stock market, asset protection
and asset accumulation techniques or strategies, and business
structuring for minimizing federal or state income taxes,
deferral of income and estate taxes, development of liability
protection, and elimination of the impact of probate on the
transition of family owned businesses to the public. WCS also
hosts a website, Wealth Information Network (WIN), which
allows subscribers to log on for information related to the
stock market. Lighthouse Publishing Group, Inc. publishes
books on related topics. The copyrights to most seminars,
video and audio tapes, and written materials are owned and
controlled by Money Chef, Inc., formerly known as USA/Wade
Cook Seminars, Inc., a related party. As used hereafter,
"Company" refers to Profit Financial Corporation and its
consolidated subsidiaries.
Accounting principles and consolidation policy
The accompanying consolidated financial statements include the
accounts of Profit Financial Corporation and its
majority-owned subsidiaries. WCS has a fiscal year end of
January 31, and the balances as of January 31, 1997, 1996 and
1995 have been used to prepare the consolidated financial
statements as of December 31, 1996, 1995 and 1994. All
significant inter-company transactions and balances have been
eliminated in the consolidation.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and related
notes to financial statements. Changes in such estimates may
affect amounts reported in future periods.
Cash and cash equivalents
The Company considers highly liquid investments with the
original maturity of three months or less to be cash and cash
equivalents. Included in these amounts are money market funds
of $581,558, and $41,348 as of December 31, 1996 and 1995,
respectively .
Marketable securities
Brokerage accounts are used by seminar instructors during the
seminars, especially at the Wall Street Workshop, to
demonstrate how to buy and sell securities using a broker.
Marketable securities consist mainly of stocks and options.
They have been categorized as trading securities and, as a
result, are stated at market value. All changes in trading
securities' fair values are reported in earnings as they
occur. Realized gains and losses on the sale of securities are
determined using the specific-identification method.
8
<PAGE> 41
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Summary of Significant Accounting Policies (continued)
Inventory
Inventory, which consists primarily of finished goods, is
valued at the lower of cost or market. Cost is determined
using the first-in, first-out method.
Property and equipment
Property and equipment are stated at cost. Depreciation is
computed using the accelerated method over the estimated
useful lives of the related assets for both financial
reporting and tax reporting purposes. Leasehold improvements
are amortized using the straight-line method over the shorter
of the estimated life of the asset or the remaining term of
the lease. Maintenance and repairs are charged to operations
when incurred. Betterments and renewals are capitalized. When
property and equipment are sold or otherwise disposed of, the
asset account and related accumulated depreciation account are
relieved, and any gain or loss is included in operations.
Revenue recognition
Tuition revenues for seminars are recognized when services are
rendered. Subscription revenues for the website membership are
deferred and recognized over the term of the subscription.
Other revenues are recognized when finished products are
shipped to customers or services have been rendered.
Advertising costs
Advertising costs are expensed when incurred.
Income taxes
Income taxes are provided for tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes. Deferred taxes are
recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes.
Barter transactions
The Company is accounting for barter credits in accordance
with APB Opinion No. 29, Accounting for Non-monetary
Transactions, and EITF issue No. 93-11, Accounting for Barter
Transactions, involving barter credits which presumes that the
fair value of the non-monetary asset exchanged is more clearly
evident than the fair value of the barter credit received, and
that the barter credit should be reported at the fair value of
the non-monetary asset exchanged.
Earnings per share
Earnings per share is based on the weighted average number of
shares of common stock and common stock equivalents
outstanding during each year. Earnings per share is computed
using the treasury stock method.
9
<PAGE> 42
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note B - Common Stock Split
On August 6, 1996, the Board of Directors declared a
two-for-one stock split on the Company's Class A common stock,
effected in the form of a stock dividend to shareholders of
record on July 15, 1996. The number of shares issued at
September 10, 1996 after giving effect to the split was
6,650,442 common shares (3,325,211 common shares before the
split). The effects of the stock split are accounted for in
all share and per share data included in these consolidated
financial statements.
Note C - Concentration of Risks
Cash in banks, based on bank balances, exceeded federally
insured limits by $574,388 and $7,851 as of December 31, 1996
and 1995, respectively. Receivables from four credit card
companies aggregated approximately $376,256 and $129,188 at
December 31, 1996 and 1995 respectively. The Company invests
the majority of its excess cash in marketable securities.
Marketable securities are carried at fair market value, which
amounted to $3,801,039, and $349,206 as of December 31, 1996,
and 1995, and accounted for 22% and 15% of the Company's
consolidated assets as of December 1996 and 1995 respectively.
The following table shows the percentage of revenues:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Seminars 52% 53% 30%
W.I.N. subscriptions 12% 7% 3%
Entity formation services 14% 20% 50%
Product sales 22% 20% 17%
</TABLE>
The following table shows the states from which the Company
derived over 10% of its seminar revenues:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
California 15% 27% 34%
Colorado 7% 11% --
Washington 13% 13% 38%
Nevada 2% 1% 16%
</TABLE>
Note D - Economic Dependency and Significant Risks and Uncertainties
The Company derived a majority of its revenues solely through
the sponsoring and promoting of products, seminars and
services of Money Chef, Inc. One of the co-trustees of the
Cook Family Trust, the shareholder of Money Chef, Inc., is the
president of the Company. This individual was the named
defendant of a fraud charge in the State of Arizona. The case
was dismissed with prejudice on June 5, 1997.
10
<PAGE> 43
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note D - Economic Dependency and Significant Risks and Uncertainties
(continued)
In March 1996, the Securities and Exchange Commission (the
"Commission") entered an order directing a private
investigation of the Company. The Company's legal counsel has
responded to the Commission's requests for documents and
information on behalf of the corporation. No enforcement
action has been taken, and the Commission has advised that the
inquiry should not be construed as an adverse reflection on
the securities involved or on any person or entity.
The Company has also received subpoenas from the State of
Washington's Department of Financial Institutions, Securities
Division requesting information related to PFC, WCS and the
Company's president.
Note E - Reorganization and Business Combination
Prior to the acquisition of WCS, PFC had been operating in two
different businesses for over five years, namely its farming
and ranching operations in Uintah County, Utah, and its
investment consulting business. On January 1, 1995, PFC
transferred its ranch operations and all related assets and
liabilities to Four Star, Inc. (Four Star) in exchange for all
of Four Star's outstanding common stock pursuant to a plan of
reorganization under the Internal Revenue Code section 368
(a)(1)(d). All of Four Star's stocks were then distributed to
Yeaman Enterprises, Inc. (Yeaman) in exchange for 1,880,000
shares of the Company's stock as part of the reorganization.
The consolidated financial statements for the periods
presented have been restated to exclude the accounts related
to the ranch operations.
The following assets and liabilities were transferred to Four
Star in the reorganization:
<TABLE>
<S> <C>
Cash $ 5,266
Receivables 277,944
Inventories 113,445
Securities 335,333
Property and equipment 1,433,642
Accounts payable 1,588
Accrued expenses 61,257
Long-term debt 380,986
</TABLE>
11
<PAGE> 44
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note E - Reorganization and Business Combination (continued)
The condensed financial positions of PFC before and after the
transfer are as follows:
<TABLE>
<CAPTION>
December 31, 1994 Transfer January 1, 1995
----------------- -------- ---------------
<S> <C> <C> <C>
Cash $ 5,266 $ 5,266 $ -
Receivables 277,944 277,944 -
Inventory 113,445 113,445 -
Property and Equipment 1,433,642 1,433,642 -
Investment in land 247,500 - 247,500
Investment in securities 461,333 335,333 126,000
----------- ----------- ----------
TOTAL ASSETS $ 2,539,130 $ 2,165,630 $ 373,500
=========== =========== ==========
Long-term debt $ 380,986 $ 380,986 $ -
Accounts payable 13,321 1,588 11,733
Accrued expenses 72,295 61,257 11,038
----------- ----------- ----------
TOTAL LIABILITIES 466,602 443,831 22,771
----------- ----------- ----------
Common stock 31,991 18,800 13,191
Additional paid-in capital 4,093,794 3,578,056 515,738
Retained earnings (2,053,257) (1,875,057) (178,200)
----------- ----------- ----------
TOTAL SHAREHOLDERS'
EQUITY 2,072,528 1,721,799 350,729
----------- ----------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 2,539,130 $ 2,165,630 $ 373,500
=========== =========== ==========
</TABLE>
On April 1, 1995, PFC acquired all of the outstanding shares
of common stock of WCS for 1,880,000 shares of the common
stock of PFC. The transaction has been accounted for as
pooling of interests and, accordingly, the consolidated
financial statements for the periods presented have been
restated to include the accounts of WCS. Net sales and net
income of the separate companies for the periods preceding the
acquisition were as follows:
<TABLE>
<CAPTION>
Net Sales Net Income
--------- ----------
<S> <C> <C>
Three months ended March 31, 1995 (unaudited):
PFC -- --
WCS 944,061 106,012
--------- ----------
Combined 944,061 106,012
--------- ----------
Year ended December 31, 1994:
PFC -- (178,200)
WCS 1,973,145 (17,530)
--------- ----------
Combined 1,973,145 (195,730)
--------- ----------
</TABLE>
12
<PAGE> 45
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note F - Related Party Transactions
The Company entered into a product agreement with Money Chef,
Inc. to obtain the rights to promote and sponsor seminars,
entity formation services and products owned and controlled by
Money Chef, Inc. for royalty payments ranging from ten to
fifty percent of gross sales. Royalty expenses totaled
$4,366,183, $755,500, and $82,923 for the years ended December
31, 1996, 1995 and 1994 respectively. $48,781 of royalties
were prepaid as of December 31, 1996 and $136,238 of royalties
was owed as of December 31, 1995. Money Chef, Inc. has opted
to receive royalties of the minimum percentage of revenue for
all of the three years.
The Company obtained services from seminar speakers provided
by companies owned by officers of the Company. Total speaker
fees paid to such companies totaled $131,337 for the year
ended December 31, 1996 and none for years 1995 and 1994.
There were no additional amounts due to such companies as of
December 31, 1996 and 1995.
Due from related parties in the amount of $663,401 represents
advances from the following:
<TABLE>
<CAPTION>
Name of Related Company's Percentage
Parties of Ownership Amount
--------------- --------------------- ---------
<S> <C> <C>
Crossroad Northwest, LP 0% $ 637,401
Five Star Consulting, Inc. 0% 25,000
Total Hoteliers, LP 0% 1,000
------------ ---------
Total $ 663,401
=========
</TABLE>
Note G - Marketable Securities
The net unrealized loss in trading securities that has been
included in earnings during the period amounted to $226,264,
$20,899, and $23,180 for the years ended December 31, 1996,
1995, and 1994 respectively.
Note H - Receivables
Following is a summary of receivables:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
----------- --------
<S> <C> <C>
Trade and credit card receivables $ 848,282 $129,188
Installment notes 1,714,802 106,904
Notes receivable from officer 249,604 -
Due from related parties 663,401 -
Other 11,378 1,611
----------- --------
Total $3,487,467 $237,703
========== ========
</TABLE>
Management estimates that substantially all receivables are
collectible.
13
<PAGE> 46
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note I - Property and Equipment
The following is a summary of property and equipment:
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
----------- ---------
<S> <C> <C>
Land $ 532,000 $ 27,470
Building 4,183,361 109,882
Equipment 1,270,583 218,555
Automobiles 828,604 --
Furniture and fixtures 681,425 52,793
Leasehold improvements -- 25,090
----------- ---------
7,495,973 433,790
Less: Accumulated depreciation (360,768) (88,779)
----------- ---------
Total $ 7,135,205 $ 345,011
=========== =========
</TABLE>
Depreciation expense charged to operations was $344,991,
$38,816 and $30,663 in December 31, 1996, 1995, and 1994,
respectively.
Note J - Non-Marketable Investments and Accounting Changes
Non-marketable investments consists of investments in venture
capital partnerships and private companies, and 99 lots of
land in a recreational development in the County of Antrim,
Michigan. The estimated non-marketable investments
approximated the carrying amount at December 31, 1996 and
1995. The fair values of investments in venture capital
partnerships and private companies were estimated based on
financial condition and operating results, or other pertinent
information. No dividends were received from non-marketable
investments during the years shown.
The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
in 1995. The Company recorded a non-cash pre-tax charge of
$99,000 for the year ending December 31, 1995 to write-down
the carrying value of the land investment in the County of
Antrim, Michigan. The Company considers the sale prices of
comparable lots in the recreational development project as
indicators of fair value.
14
<PAGE> 47
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note K - Long-Term Debt
The following is a summary of long-term debt:
<TABLE>
<CAPTION>
December 31,
1996 1995
------------ ----------
<S> <C> <C>
Unsecured note payable to unrelated party, due
in monthly installments of $11,100, bears interest
at 21% per annum $ -- $ 70,000
Unsecured note payable to unrelated party, due in
monthly installments of $1,000, bears interest at 20%
per annum -- 6,204
Automobile loan payable to a credit union assumed by
the company on behalf of an employee, due December
2003, bears interest at 9.25% per annum 36,178 --
Unsecured note payable to a related party, originally
due October 15, 1996, bears interest at 10% per annum 19,000 19,000
Unsecured note payable to a related party, originally
due October 15, 1996; bears interest at 10% per annum 45,000 45,000
Mortgage payable, secured by land and building, due in monthly
installments of principal and interest of $50,000 from
September 1, 1996 through August 1, 1997, $100,000 from
September 1, 1997 to February 1, 1999 and $555,862 on March 1,
1999, includes interest at 9% per annum 2,393,292 --
Mortgage payable, secured by land and building, due
in monthly installments of $1,067, bears interest at
10% per annum -- 118,735
------------ ----------
Total Debt $ 2,493,470 $258,939
Less: Current maturities
others (660,708) (77,175)
related parties (19,000) (19,000)
officer (45,000) (45,000)
------------ ----------
Total Long Term Debt $ 1,768,762 $ 117,764
============ ===========
</TABLE>
15
<PAGE> 48
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note K - Long-Term Debt (continued)
The following are maturities of long-term debt for each of the
next five years:
<TABLE>
<S> <C>
1997 $ 724,708
1998 1,091,782
1999 655,498
2000 4,954
2001 5,432
Thereafter 11,096
-----------
Total $ 2,493,470
Less: Current long-term debt 724,708
-----------
$ 1,768,762
===========
</TABLE>
Note L - Prepaid Advertising
In 1995, the Company entered into an agreement with Associated
Reciprocal Traders, Ltd. (ART) to purchase from ART 20,000
Investor Relations-Advertising-Infomercial radio air time
spots, priced at $25 per ad spot, per station, for a sum total
of $500,000. In payment of the foregoing, the Company issued
100,000 shares of common stock to ART in January 1996. The
prepaid advertising is shown as a reduction of shareholders'
equity rather than as an asset.
Note M - Disclosures About Fair Value of Financial Instruments
Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standards (SFAS) No. 107,
Disclosures About Fair Value of Financial Instruments, as part
of a continuing process by the FASB to improve information
regarding financial instruments. The following methods and
assumptions were used to estimate the fair value of each class
of financial instruments:
Cash and cash equivalents - The carrying amount of cash and
cash equivalents approximates its fair value.
Marketable securities - The fair value of marketable
securities were estimated based on quotes obtained from
brokers for those instruments.
Non-Marketable Investments - The fair value of non-marketable
investments is determined by financial positions of the
investee companies and market conditions.
Margin loans in investment accounts - The carrying amount of
margin loans approximates its fair value.
Long-Term Debt - The fair values of the Company's long-term
debt either approximates fair value or estimates using
discounted cash flow analyses based on the Company's current
incremental borrowing rates for similar types of borrowing
arrangements.
16
<PAGE> 49
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note M - Disclosures About Fair Value of Financial Instruments (continued)
The carrying amounts and fair values of the Company's
financial instruments at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 635,141 $ 635,141 $ 26,840 $ 26,840
Marketable securities 3,801,039 3,801,039 349,206 349,206
Non-marketable investments 522,600 522,600 1,235,100 1,235,100
Margin loans in investment
accounts 1,103,936 1,103,936 - -
Long-term debt 1,768,762 1,768,762 117,764 117,764
</TABLE>
The carrying amounts in the table are included in the balance
sheet under the indicated captions.
Note N - Lease and Other Commitments
Operating lease commitments are primarily for office space.
Rental expense amounted to $294,918, $109,133 and $70,314 for
the years ended December 31, 1996, 1995, and 1994
respectively. Future minimum rental commitments are as
follows:
<TABLE>
<S> <C>
1997 $ 46,098
1998 46,098
1999 46,098
2000 7,683
----------
Total $ 145,977
==========
</TABLE>
The Company entered into an employment agreement in January,
1997, with one of its executive officers. The agreement
provided for a minimum salary plus incentive bonuses which are
payable if specified management goals are attained. The
agreement also gives the officer the right to purchase 80,000
shares at $1.50 per share through 1999 at 20,000 shares per
year. The options may be exercised within a ten year period
from the date of vesting.
The Company entered into agreements in 1996 with two
contracting companies to make improvements on its office
building in Seattle, Washington. Total commitments on future
payments was approximately $375,000 as of December 31, 1996.
17
<PAGE> 50
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note O - Income Taxes
Provisions for income taxes in the consolidated statements of
income consist of the following components:
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Current
Federal $ 2,321,968 $ 183,200 $ --
State -- -- --
Other States 55,000 -- --
----------- ----------- -----------
2,376,968 183,200 --
Deferred
Federal (775,724) 540 (7,880)
State -- -- --
----------- ----------- -----------
(775,724) 540 (7,880)
----------- ----------- -----------
Total income taxes $ 1,601,244 $ 183,740 $ (7,880)
=========== =========== ===========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
Deferred tax assets: 1996 1995
----------- -----------
<S> <C> <C>
Unrealized gain on trading securities $ 79,192 $ 7,340
Deferred revenues 806,294 --
State income tax 19,250 --
----------- -----------
Total deferred tax assets 904,736 7,340
----------- -----------
Deferred tax liabilities:
Accelerated depreciation 61,691 --
State income tax 59,981 --
----------- -----------
Total deferred liabilities 121,672 --
----------- -----------
Net Deferred tax asset $ 783,064 $ 7,340
=========== ===========
</TABLE>
18
<PAGE> 51
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note O - Income Taxes (continued)
The reconciliation of the effective income tax rate to the
Federal statutory rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 35.0%
Unrealized gain on trading securities 1.7 1.8 --
Deferred revenues 17.3 -- --
Accelerated depreciation (1.3) -- --
Capitalized interest (1.3) -- --
State income tax 0.4 -- --
-------- -------- --------
Effective income tax rate 51.8% 36.8% 35.0%
======== ======== ========
</TABLE>
Note P - Revenues and Other Cost of Revenues
<TABLE>
<CAPTION>
Seminar Product Entity WIN
Revenues Sales Formations Subscriptions Total
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Revenues, net of returns & discounts $ 23,817,315 $ 10,608,421 $ 3,716,528 $ 2,582,251 $ 40,724,515
Other cost of revenues:
Cost of goods sold -- 5,017,027 -- -- 5,017,027
Credit card fees 556,663 247,942 86,864 60,353 951,822
Cost of meeting rooms 1,488,212 -- -- -- 1,488,212
Speaker fees 1,373,855 -- 764,312 -- 2,138,167
Travel 1,383,464 -- 206,724 -- 1,590,188
------------ ------------ ------------ ------------ ------------
Total $ 4,802,194 $ 5,264,969 $ 1,057,900 $ 60,353 $ 11,185,416
------------ ------------ ------------ ------------ ------------
Year ended December 31, 1995:
Revenues, net of returns & discounts $ 4,049,360 $ 1,477,200 $ 1,538,459 $ 502,316 $ 7,567,335
Other cost of revenues:
Cost of goods sold -- 1,121,336 -- -- 1,121,336
Credit card fees 90,359 32,963 34,330 11,209 168,861
Cost of meeting rooms 99,720 -- -- -- 99,720
Speaker fees 353,915 101,937 282,520 -- 738,372
Travel 357,772 -- 132,327 -- 490,099
------------ ------------ ------------ ------------ ------------
Total $ 901,766 $ 1,256,236 $ 449,177 $ 11,209 $ 2,618,388
------------ ------------ ------------ ------------ ------------
Year ended December 31, 1994:
Revenues, net of returns & discounts $ 532,422 $ 331,225 $ 1,064,670 $ 44,828 $ 1,973,145
Other cost of revenues:
Cost of goods sold -- 217,355 -- -- 217,355
Credit card fees 12,805 7,293 23,441 987 44,526
Cost of meeting rooms 14,083 -- -- -- 14,083
Speaker fees 64,279 54,017 286,986 -- 405,282
Travel 35,123 -- 62,442 -- 97,565
------------ ------------ ------------ ------------ ------------
Total $ 126,290 $ 278,665 $ 372,869 $ 987 $ 778,811
------------ ------------ ------------ ------------ ------------
</TABLE>
19
<PAGE> 52
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note Q - Dividends
The Company did not declare or pay any dividends for the years
shown in these financial statements.
Note R - Non-Monetary Transactions
In 1995, the Company accepted a single family home subject to
a mortgage balance of $119,825 from an employee in full
settlement of a 10.5% note receivable with an outstanding
balance of $17,661. The asset was capitalized at $137,486, and
no gain or loss was charged to operations. The employee
entered into an agreement with the Company to rent the
property for a monthly rent of $1,300 through July 2000. Under
the agreement, the employee also has an option to repurchase
the property at specified amounts through July 2000. In 1996,
the Company sold the property to another employee for
$137,352, and received a note bearing 8% interest per annum as
consideration.
In June 1996, prior to the two-for-one stock split, the
Company issued 16,000 shares of its Class A common stock at $3
per share ($1.50 per share with effect of the stock split) to
various employees for subscription notes receivable. In
addition, the Company issued 30,422 shares of its Class A
common stock at $2.50 per share to various employees as
additional employee compensation.
Note S - Supplementary Disclosure of Cash Flow Information
The Company paid $263,285 and $25,422 in interest, and
$100,000 and $78,000 in income taxes, in the years ended
December 31, 1996 and 1995 respectively. No interest or income
taxes were paid in the year ended December 31, 1994.
The Company purchased a three-story commercial building in
July, 1996, and relocated in January 1997. The $3,300,000
purchase was financed with a $2,550,000 mortgage with an
interest rate of 9% per annum, and a down payment of $750,000.
20
<PAGE> 53
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Profit Financial Corporation
Seattle, Washington
The audits referred to in our report to the Board of Directors of Profit
Financial Corporation and subsidiaries dated June 25, 1997, relating to the
consolidated financial statements of Profit Financial Corporation and
subsidiaries included the audit of schedules listed under Item 14 of Form 10-K
for the years ended December 31, 1996, 1995, and 1994. These financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statement schedules based upon our
audits.
In our opinion such financial statement schedules present fairly, in all
material respects, the information set forth therein.
Certified Public Accountants
Santa Monica, California
25 June 1997
<PAGE> 54
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE 1 - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
------------------------------
CURRENT ASSETS 1996 1995
------------ ------------
<S> <C> <C>
Investment in subsidiary $ 110,552 $ 110,552
Investment in land 148,500 148,500
Investment in non-marketable securities 18,600 18,600
Other receivables 1,378 --
Due from subsidiary 48,013 --
------------ ------------
TOTAL ASSETS $ 327,043 $ 277,652
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
------------------------------
CURRENT LIABILITIES 1996 1995
------------ ------------
Accounts payable and accrued expenses $ 22,080 $ 41,396
------------ ------------
TOTAL LIABILITIES 22,080 41,396
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock -- --
Common stock 66,807 31,991
Paid-in capital 1,072,608 498,938
Prepaid advertising (500,000) --
Retained earnings (deficit) (334,452) (294,673)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 304,963 236,256
------------ ------------
TOTAL LIABILITIES, MINORITY INTEREST,
AND SHAREHOLDERS' EQUITY $ 327,043 $ 277,652
============ ============
</TABLE>
22
<PAGE> 55
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE 1 - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
Years ended December 31,
---------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME $ 2,013 $ -- $ --
GENERAL AND ADMINISTRATIVE EXPENSES (41,792) (18,625) --
LOSS ON NON-MARKETABLE SECURITIES -- (107,400) (178,200)
IMPAIRMENT OF LONG-LIVED ASSETS -- (99,000) --
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (39,779) (225,025) (178,200)
PROVISION FOR INCOME TAXES -- -- --
--------- --------- ---------
NET LOSS $ (39,779) $(225,025) $(178,200)
ACCUMULATED DEFICIT, BEGINNING (294,673) (178,200) --
ISSUANCE OF COMMON STOCK IN
EXCHANGE FOR INVESTMENT
IN SUBSIDIARY -- 108,552 --
--------- --------- ---------
ACCUMULATED DEFICIT, ENDING $(334,452) $(294,673) $(178,200)
========= ========= =========
</TABLE>
23
<PAGE> 56
PROFIT FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE 1 - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss) $ (39,779) $(225,025) $(178,200)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Impairment of long-lived assets -- 99,000 --
Loss on investment in non-marketable securities -- 107,400 178,200
Changes in assets and liabilities:
Receivables (1,378) -- --
Due from subsidiary (48,013) -- --
Accounts payable and accrued expenses (19,316) 18,625 --
--------- --------- ---------
TOTAL ADJUSTMENTS (68,707) 225,025 178,200
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES (108,486) 225,025 178,200
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 108,486 -- --
--------- --------- ---------
NET INCREASE IN CASH -- -- --
CASH, beginning of year -- -- --
--------- --------- ---------
CASH, end of year $ -- $ -- $ --
========= ========= =========
</TABLE>
24
<PAGE> 1
EXHIBIT 3.1(d)
AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
PROFITEER CORPORATION
(NAMED CHANGED HEREIN TO PROFIT FINANCIAL CORPORATION)
WHEREAS, there was issued by the Secretary of State a Charter
dated February 2, 1979 constituting and creating PROFITEER CORPORATION a
corporation organized under the laws of this state with its principal place of
business in Salt Lake City, Utah.
The undersigned, President and Secretary of PROFITEER
CORPORATION hereby certify that ten (10) days notice was given each shareholder
by mail or personal contact as required by the Corporation's by-laws, of the
meeting of the shareholders which was held on September 10, 1991, which notice
stated the time and place of the meeting and the purpose thereof.
And further, that the meeting was duly held pursuant to such
notice. At the time of the meeting there were 9,623,394 shares outstanding and
entitled to vote, 5,622,772 shares present in person or by proxy and that
5,622,772 shares voted in favor of, no shares voting against, amending the
Articles of Incorporation as follows:
That Article I, be amended and changed to read as follows:
Name: the name of the Corporation is PROFIT FINANCIAL
CORPORATION. That Article IV, be amended and changed to read as follows:
The stock of this corporation is divided into two classes,
namely: Common Stock in the amount of 20,000,000 (twenty million) shares of the
par value of one cent ($0.01) each, and Preferred Stock in the amount of Five
million (5,000,000) shares of the par value of Ten dollars ($10) each.
The Common Stock shall be subject to the prior rights of the
holders of the Preferred Stock as herein declared, and shall be entitled to such
dividends as the board of directors may declare, only out of any surplus or net
profits remaining after the payment of the full dividends for any fiscal year
<PAGE> 2
on the preferred stock, or after there shall have been set aside from the
surplus or net profits a sum sufficient for the payment of full dividends on the
preferred stock for such fiscal year.
In no event shall any dividend whatever be paid or declared or
any distribution made on the common stock, or any other stock hereafter created,
of the company other than preferred stock, unless and until full cumulative
dividends on the preferred stock for all past quarterly dividend periods shall
have been paid, full cumulative dividends as aforesaid on the preferred stock
for the then or current quarterly dividend period shall have been paid or a sum
sufficient for the payment thereof set apart for such payment, and the surplus
of the company available for the declaration and payment of dividends on the
preferred stock shall, after paying or making provision for the payment of
dividends on the preferred stock as above provided, at least equal ten dollars
for each share of the preferred stock then outstanding.
And further, your petitioners certify that they have complied
in all respects with Sections 16-10-54 through 16-10-60, Utah Code Annotated,
1953 as amended.
WHEREFORE, they pray that the Articles of Incorporation of
PROFITEER CORPORATION be so amended.
DATED this 10th day of September, 1991.
/s/ David R. Yaman
------------------------------------
President
/s/ Krista Cafterton
------------------------------------
Secretary
STATE OF UTAH )
: SS
County of Salt Lake )
On this 10th day of September, 1991, before me, a notary public,
personally appeared David R. Yeaman and Krista Castleton, known to me to be the
persons whose names are subscribed to the within document, and acknowledge that
they executed the same.
/s/ Janice Ragsdale
- - ------------------------------
Notary Public
2
<PAGE> 1
EXHIBIT 10.1(a)
PRODUCT AGREEMENT
AN AGREEMENT made this the 3 day of January, 1993, between United
Support Association, Inc. (USA), the Purchaser, 15220 SE 272nd, Suite F, Kent,
Washington, 98042 and USA/Wade Cook Seminars, Inc. (WCS), the Seller, 18929 SE
292nd Place, Kent, Washington, 98042
USA and WCS hereby agree as follows:
RECITALS
Whereas, USA is a Nevada Corporation, sponsoring and promoting certain
seminars owned by WCS, a Nevada Corporation; and
Whereas, USA, on behalf of WCS, has been sponsoring and promoting
certain seminars owned by WCS for the past several years controlled only by a
verbal agreement between parties; and
Whereas, the cost charged to USA for the right to use the name and
products owned by WCS for the seminar business has not been documented; and
Whereas, it is understood, one of the principle owner, principle
officer, or General Manager, of both corporations, USA and WCS, is Wade B. Cook,
all potential conflict of interests have been disclosed, discussed and waived by
the respective Board of Directors and shareholders of USA and WCS; and
Whereas, both parties desire to memorialize their previous verbal
agreement and past performance with a written agreement;
Therefore, the parties agree to the following terms:
I. PRODUCT COST
A. As full consideration for any and all rights granted by WSC, USA
shall pay WCS, by check mailed to the address set forth above,
the following sums:
1) For the fiscal year 1993 (ending January 31, 1994), and for
the fiscal year 19984 (ending January 31, 1995), USA shall pay
ten percent (10%) of all gross sales related to the seminars
business protected and owned by WCS, but promoted and
sponsored by USA.
2) For the fiscal year 1995 (ending January 31, 1996), and for
the fiscal year 1996 (ending January 31, 1997), USA shall pay
WCS from ten percent (10%) to thirty percent (30%) of all
gross sales. WCS shall have an option of taking a minimum of
ten percent (10%) or a maximum of thirty percent (30%) of all
gross sales. WCS shall also have the option of taking the
minimum payment of ten percent (10%) in direct payment, and
the optional twenty percent (20%) may be paid
<PAGE> 2
directly into stock brokerage accounts on behalf of WCS.
3) Gross sales shall be described as the total amount of money
collected by USA directly relating to the promotion and
sponsorship of certain seminars owned and controlled by WCS,
including the sale of products and services owned and
controlled by WCS, minus all refunds or bad debts.
4) The cost for the right to market and sell any entity
structuring service (Corporation, Limited Partnership, Living
Trust, Charitable Remainder Trust, pension, Business Trust)
shall be limited to ten percent (10%) with the distinction
that any entity seminar sales may be subject to the thirty
percent (30%) cost of goods factor.
5) In the event Wade B. Cook teaches any seminar sponsored by
USA, then WCS shall be entitled to fifty percent (50%) of
gross sales from that event.
II. PAYMENT SCHEDULE
A. As full consideration for any and all rights granted by WCS,
USA shall pay WCS, by check mailed to the address set forth
above, the following sums:
1) Ten percent (10%) of all gross sales on a bi-monthly
basis. If WCS desires any sum over ten percent (10%), up
to a maximum of thirty percent (30%) then WCS must notify
USA either in writing or verbally. USA will forward a
check for the remaining requested balance within
twenty-four (24) hours.
2) Any remaining balance due WCS must be claimed within sixty
(60) days after each fiscal year or the option to claim
the outstanding balances, if any, expires.
III. EXAMINATION OF BOOKS
A. WCS may examine the financial books of USA upon written
request.
B. The financial books shall be made available, at USA's
headquarters, within ten (10) days after The written request.
IV. ADVERTISING AND PROMOTION
A. USA shall have the right in conjunction with WCS, to
advertise and promote products in a manner that is mutually
acceptable to both parties.
B. Any alterations of the product for the purposes of advertising
must be approved by WCS.
2
<PAGE> 3
V. DISPUTES AND GOVERNING LAW
A. EXCLUSIVE JURISDICTION FOR THE DETERMINATION OF DISPUTES
BETWEEN OR AMONG PARTIES TO THIS AGREEMENT IS HEREBY VESTED
IN THE COURT OF COMPETENT JURISDICTION, IN THE STATE OF
WASHINGTON.
B. ARBITRATION MAY ALSO BE UTILIZED AS AGREED UPON BY BOTH
PARTIES.
- - ----------------------------------------------
DATE
ACCEPTED AND AGREED:
UNITED SUPPORT ASSOCIATION, INC.
- - ----------------------------------------------
WADE B. COOK
President of United Support Association, Inc.
USA/WADE COOK SEMINARS, INC.
- - ----------------------------------------------
WADE B. COOK
President of USA/Wade Cook Seminars, Inc.
3
<PAGE> 1
EXHIBIT 10.3(b)
LIGHTHOUSE PUBLISHING GROUP, INC.
PUBLISHING AGREEMENT
This AGREEMENT hereby replaces in whole the Agreement entitled
"Lighthouse Publishing Group, Inc. Publishing Agreement" dated February 1, 1996,
between Wade Cook Seminars and Lighthouse Publishing Group, Inc.
This AGREEMENT is effective the 1st day of February 1996 , between Wade
B. Cook of Seattle, Washington (hereinafter called the Author) and Lighthouse
Publishing Group, Inc. , whose principal place of business is at 14675
Interurban Avenue South, Seattle, Washington, 98168-4664, (hereinafter called
the Publisher).
I. GRANT OF The Author hereby grants, assigns, and transfers to the
RIGHTS Publisher the following exclusive rights and privileges to
and in connection with a Work, presently entitled Wall
Street Money Machine which Work is a book.
A. The sole and exclusive book publication rights in
the United States, its territories, dependencies, and
possessions, the Republic of the Philippines, and Canada,
and the right to sell copies of the Work in the open market
throughout the world.
B. The sole and exclusive subsidiary publication and
performance rights set forth in Article VIIA below. These
subsidiary publication and performance rights are granted
to the Publisher for the United States, its territories,
dependencies, and possessions, the Republic of the
Philippines, and Canada, and include the right to authorize
others to exercise in any foreign country any of the rights
granted to the Publisher.
II. COPYRIGHT It is understood and greed that the copyright shall be
secured by the Publisher in the name of the book and the
Publisher is hereby authorized to take all steps required
to secure such copyright in the United States of America.
The Publisher agrees to print an appropriate copyright
notice in each and every copy of the published work and to
require all parties to whom it grants licenses in
connection with the work to do the same. The party in whose
name copyright is registered shall hold for the benefit of
the other such rights as the equities hereby created may
prescribe. Unless it specifically agrees to do so in
writing, the Publisher shall not be responsible for
securing any copyright outside the United States of
America.
III. MANUSCRIPT The Author agrees to deliver to the Publisher not later
than February 28 , 1996 three finally revised copies of the
manuscript, approximately 70,000 words in length,
satisfactory in form, style, and content and acceptable to
the Publisher in its sole judgment and discretion.
FORM OF A. Unless otherwise agreed in writing, the Author shall
MANUSCRIPT furnish promptly and free of charge to the Publisher,
complete and ready for reproduction, all drawings, maps,
photographs, charts and designs which are a part of or
necessary to the text. If the Author fails to supply any
necessary drawings, maps, photographs, charts and designs
in satisfactory form and within the specified time, the
Publishers shall have the right to have them made and the
charges and expenses of making them shall be paid for by
the Author.
B. The Publisher may, at his discretion, cause an index
to be made of the work and charge the cost thereof against
any sums due the Author hereunder.
AUTHOR C. The provisions as to satisfaction and acceptability
COMPLIANCE to the Publisher and time of delivery of such copy are
material terms of this agreement and upon the Author's
failure to comply with any of such provisions, the
Publisher may at its option by written notice to the Author
terminate this agreement, whereupon the Author shall return
to the Publisher all amounts which it may have advance to
him. In such event, if the manuscript should be completed
subsequently, the Author shall nevertheless be obligated to
offer the same to the Publisher, which at its option, shall
have the right to publish the same upon the terms of the
agreement.
Page 1
<PAGE> 2
CORRECTIONS D. If the Publisher is directed by the Author to make
alterations in any proofs from final copy as delivered,
which shall cost more than ten percent of the cost of
composition of the Work, the Author agrees to pay said
excess. The Author shall pay in full for any corrections in
the plates which he requires or which are necessary for the
correction of actual errors after the plates have been made
in conformity with the last proof as corrected by the
Author. The Publisher shall upon request keep the Author
informed of such excess charges.
SUBSEQUENT E. When the Publisher considers it necessary, it shall
REVISIONS have the right in its sole discretion to call upon the
Author to revise the Work, and the Author shall make such
revisions. The provisions of this agreement shall apply to
revision of the Work by the Author as though any such
revision were the original Work being published for the
first time, except that the manuscript of the revised Work
shall be delivered in final form by the Author to the
Publisher within a reasonable amount of time; further, no
initial payment shall be made in connection with such
revision. Should the Author not provide the revision within
a reasonable time, or should the Author be deceased, the
Publisher may have the revision done and charge the cost of
such revision against royalties due or that may become due
the Author, and may display in the revised Work, and in
advertising, the name of the person or persons who revised
the Work.
RETYPING F. If in the opinion of the publisher it is considered
expedient to have the manuscript retyped in as many copies
as shall be necessary, the cost of such retyping shall be
borne by the Author.
PUBLISHER'S G. The Publisher shall be free to prepare the
DETERMINATION manuscript of the Work for the printer in such manner as
shall be consistent with their publishing house style. All
details as to the manner of publication, distribution and
advertising, including the format and price of the Work in
its manufactured form and the number and distribution of
free copies, shall be left to the sole discretion of the
Publisher.
H. The Publisher will use the same care in protecting
the manuscript and other material supplied to it hereunder
as is its customary practice in protecting similar material
in its possession, but it shall not be liable for damages,
if any, resulting from the loss or destruction of such
materials or any part thereof.
IV. ADVANCE The Publisher will pay to the Author as an advance
payment against all monies accruing to the Author under
this agreement the sum of: None
V. ROYALTIES A. The Publisher shall pay to the Author the following
royalties on regular net sales, other than sales falling
within (B) through (F) below on the Retail selling price of
each copy sold: 10% on all copies sold.
LIMITED B. The Publisher shall pay the Author one half of the
REPRINT stipulated royalty, as stated above, on all copies sold
EDITION from a reprinting of 3,500 copies or less, made after one
year from the date of the first publication, this reduced
royalty being provided by reason of the increased cost of
manufacturing of small reprintings, to enable the Publisher
to keep the Work in print and circulation as long as
possible.
SALE OF C. Where sheets are sold, except as a remainder, the
SHEETS percentage of royalty shall be the same as for bound
books and shall be calculated on the net amount received by
the Publisher.
FREE COPIES D. No royalties shall be paid on copies furnished
gratis to the Author, or for review, advertising, samples
or like purposes.
EXCERPTS E. The Author grants sole and exclusive rights to the
PERMISSIONS Publisher in the exercise of its discretion, to grant
permission to publish extracts from the Work, whether or
not a fee shall be collected on the Work for such use, the
Publisher warranting to make no gratuitous grants of
permissions, except as shall, in its estimate, advance the
sale of the Work or enhance the public esteem of the
Author; the Publisher shall pay to the Author one half of
all sums of money received as compensation for such grants
of permission to reprint extracts.
Page 2
<PAGE> 3
The Publisher is authorized to permit publication of
the Work in Braille, or photographing, recording and/or
microfilming the Work for the physically handicapped
without payment of fees and without compensation to the
Author, providing no compensation is received by the
Publisher. In case a compensation is received, the
Publisher shall pay the Author fifty percent (50%) of the
proceeds.
VI. REMAINDERS A. If, in the opinion of the Publisher, the Work shall
- - - OVERSTOCK become unsalable in the ordinary channels of the trade the
Publisher may at its option sell part or all of the
remaining copies as "remainders" after first informing the
Author of its intention to do so.
B. The Author shall receive a royalty of ten percent of
the amount of the Publisher's sale price secured over the
cost of production for all copies of overstock which the
Publisher deems it expedient to sell at "remainder" prices,
i.e., at less than half of the catalog retail price, except
when these are sold at or below cost, in which case no
royalty shall be paid.
VII. SUBSIDIARY A. The further and additional rights referred to in
RIGHTS this agreement are hereby defined to include the rights
enumerated below, and are to be shared by the Author and
the Publisher in the percentage indicated, less only such
direct expenses, including agent's commissions, as shall be
incurred by the Publisher in disposing of such rights:
<TABLE>
<CAPTION>
To Author To Publisher
<S> <C> <C>
1. Abridgment, condensation, or digest...........................50% 50%
2. Anthology or quotation........................................50% 50%
3. Book clubs or similar organizations...........................50% 50%
4. Reprint.......................................................50% 50%
5. Special editions..............................................50% 50%
6. Second serial and syndication (including reproduction in
compilations, magazines, newspapers, or books).............50% 50%
</TABLE>
B. All revenue derived from the sale of rights not
specifically enumerated, whether now in existence or
hereinafter coming into existence, shall be shared equally
by the Author and the Publisher.
C. All such rights shall be disposed of by the sale,
lease, license, or otherwise by the Publisher who for that
purpose is constituted the attorney-in-fact of the Author.
The Author agrees to sign, make, execute, deliver and
acknowledge all such papers, documents and agreements as
may be necessary to effectuate the grants hereinabove
contemplated. In the event that the Author shall fail to do
so, they may be signed, executed, delivered and
acknowledged by the Publisher as the attorney-in-fact of
the Author with the same full force and effect as if signed
by the Author. All sums due under this Agreement shall be
paid to the Author's agent Money Chef, Inc. or other
designated agent. whose receipt shall be a full and valid
discharge of the Publisher's obligations and who shall act
with the authority of the Author in all matters arising out
of this agreement.
IX. PUBLICATION The Publisher, in consideration of the rights granted,
DATE agrees to publish the work at its own expense, in such
style or styles as the Publisher deems most advisable, not
later than 3 months after the Publisher's acceptance of the
final revised manuscript (except on account of late
delivery of manuscript by the Author, strikes, fires, other
contingencies beyond the control of the Publisher or its
suppliers, or advisability of postponement because of
prospective advantageous trade conditions, in which event
publication shall be postponed.)
XI. AUTHOR'S A. The Author represents and warrants to the Publisher:
WARRANTY (a) that the work is original; (b) that he is the sole
author and proprietor thereof, and has full power to enter
into this agreement; c) that the work has not heretofore
been published in whole or part in volume form and that he
has not entered into or become subject to any contract,
agreement or understanding with respect thereto other than
this agreement; (d) that if published it will not infringe
upon any proprietary right at common law, or any statutory
copyright, or any other right whatsoever; and (e) that it
is innocent and contains no matter whatsoever that is
obscene, libelous, in violation of any right of privacy or
otherwise in contravention of law. The Author shall
indemnify and hold harmless the Publisher against any
damage or judgment, including court costs and attorneys'
fees, which may be sustained or recovered against the
Publisher
Page 3
<PAGE> 4
by reason of the publication or sale of the Work, arising
from anything contained therein. Author shall also
reimburse the Publisher for all expenses including court
costs, attorneys' fees and amounts paid in settlement,
sustained by the Publisher in resisting any claim, demand,
suit, action or proceeding asserted or instituted against
the Publisher based upon the publication sale of the Work
by reason of anything contained therein.
PLAINTIFF B. The Author hereby grants to the Publisher the right,
ACTION if copyright is in the Author's name, to bring in the name
COPYRIGHT of the Author as plaintiff or complainant, any action or
ASSIGNMENT proceeding for the enjoining of an infringement of the
copyright in the said Work and for any damages resulting
therefrom, and the net amount recovered after deducting all
expenses of suit shall be divided equally between the
Author and Publisher. The copyright shall be assigned by
either party to the other on demand, when necessary for
bringing, defending or maintaining a copyright action under
this agreement, after the termination of which action the
copyright shall on demand be reassigned.
COMPETING C. The Author will not, without the written consent of
WORKS the Publisher, write, print, publish or produce, or cause
to be written, printed, published or produced, during the
continuance of this contract, any other edition of said
Work or any work in any form of a similar character or
title tending to interfere with or injure the sale of the
Work in any manner.
AUTHOR'S D. The Author agrees, in the event that the Author
PERMISSION plans to incorporate in the Work any writings or
composition previously published elsewhere, to obtain and
deliver to the Publisher proper and complete written
permission and authorization to reprint same from the owner
of the copyright covering same.
XII. In case the Publisher fails to keep said Work in print
WITHDRAWAL and for sale and after written demand from the Author,
OF WORK declines or neglects to reprint the work within six months
and to offer it for sale, or in the event that, after one
year from the date of the first publication, the Work in
the opinion of the Publisher is no longer merchantable or
profitable, and it gives one month's notice to the Author
of its desire and intention to discontinue publication,
this contract shall terminate and all rights preserved,
with any plates of illustrations furnished by the Author
and any remaining copies and sheets shall be transferred to
the Author, provided that Author shall pay the
manufacturing costs (including composition) of such plates
and the manufacturing cost of such remaining copies or
sheets, in default of which payments the Publisher shall
have the rights to destroy any plates and to sell remaining
copies or sheets at cost of less, without payment of
royalty to the Author upon such copies or sheets. In case
of the termination of the contract, if the copyright is in
the name of the Publisher it shall assign said copyright to
the Author.
The Work shall not be considered to be out of print if
it is on public sale in any printed edition, in the United
States, or if there shall be in existence a contract for
cheap edition publication which provides for publication
within six (6) months after the work is out of print in the
regular edition.
XIII. A. If a petition in bankruptcy (as distinguished from
BANKRUPTCY reorganization or arrangement) shall be filed by the
Publisher, or shall be filed against the Publisher and
finally sustained, the Author shall have right to buy back,
at his option, to be exercised in thirty days, the rights
of publication at their fair market value, to be determined
by agreement, together with any plates or remaining copies
of sheets, at their fair market value, this also to be
determined by agreement, and thereupon this contract shall
terminate. However, no reversion of rights under this
clause shall take place until after the Author has repaid
to the Publisher any indebtedness incurred by him and still
outstanding under this agreement. If this agreement
contains a clause of option on future books by the Author,
such clause shall become null and void in event of the
Publisher's bankruptcy or receivership.
AUTHOR'S B. The Author, upon his written request, shall have the
EXAMINATION right to examine or cause to be examined through certified
public accountants the books of account of the Publisher
insofar as such books of account shall relate to the Work.
If such examination shall reveal errors of accounting
(other than those arising from an interpretation of this
agreement) amounting to a sum in excess of ten percent of
the total royalties earned in the period under examination
to the Author's disadvantage, the costs of such examination
shall be borne by the Publisher, otherwise such costs shall
be borne by the Author.
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XIV. SEMI- The Publisher agrees to render semi-annual statements
ANNUAL of account to March 31st and September 30th of each year,
STATEMENTS on the succeeding July 1st and January 1st and to
PAYMENTS make settlements in cash or about said last mentioned
dates. In making accountings, the Publisher shall have the
right to allow for a reasonable reserve against returns and
nonpayment of invoices for copies billed out by the
Publisher.
XV. AUTHOR'S The Publisher agrees to present to the Author 100 (one
COPIES hundred) free copies of said Work upon publication, and to
permit the Author to purchase from it further copies for
its own personal use, at a discount of forty percent off
list price. Author shall be billed directly for these
copies, and shall make payment therefor within 30 days of
invoice date. No consignment sales shall be made to Author.
Author shall not receive royalties on sales made to him.
XVI. All payments made by Publisher to the Author, whether
RECOVERABLE under this agreement or not, shall be chargeable against
PAYMENTS and recoverable from any or all monies accruing to the
Author under this contract and for all other contracts
between the parties or their assigns.
XVIII. TAX It is mutually agreed that State, Federal, and Foreign
WITHHOLDING taxes on the Author's earnings, when paid by the Publisher,
are proper charges against the Author's earnings due under
this agreement, and may be withheld by the Publisher.
XVIII. This agreement shall be binding upon and shall ensure
ASSIGNMENT to the benefit of the parties hereto, their successors,
assigns, executors, administrators and/or personal
representatives and may be assigned by either party hereto,
except that no assignment by the Author shall be valid
against the Publisher unless the Publisher has received
written notice therefrom from the Author and has consented
to the same in writing.
XIX. Any controversy or claim arising out of this agreement
ARBITRATION or the breach thereof shall be settled by arbitration in
accordance with rules then obtaining of the American
Arbitration Association, and judgment upon the award may be
entered in the highest court of the form, State or Federal,
having jurisdiction. Such arbitration shall be held in the
City of Seattle, Washington, unless otherwise agreed by the
parties. The Author may at his option, in case of failure
to pay royalties, refuse to arbitrate, and pursue his legal
remedies.
XX. Any written notice required under any of the provisions
NOTICES of this agreement shall be deemed to have been properly
served by delivery in person or by mailing the same to the
parties hereto at the addresses set forth above, except as
the addresses may be changed by notice in writing;
provided, however, that notices of termination shall be
sent by registered mail.
XXI. A waiver of any breach of this agreement or of any of
WAIVER the terms or conditions by either party thereto shall not
be deemed a waiver of any repetition of such breach or in
any wise affect any other terms or conditions hereof; no
waiver shall be valid or binding unless it shall be in
writing, and signed by the parties.
XXII. DELIVERY This agreement shall not be binding on either the
OF CONTRACT Publisher or the Author unless it is signed by both parties
and delivered to the Publisher within a period of two
months from the date of the agreement.
The changes, alterations and interlineations made in Articles VII, X, XVI of
this contract and the additional Articles numbered NONE made and added before
execution hereof.
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IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
respective hands and seals the day and year first above written.
LIGHTHOUSE PUBLIISHING GROUP, INC.
/s/ JERALD MILLER /s/ WADE B. COOK
- - ------------------------------- -------------------------------
By: Jerald Miller Wade B. Cook, Author
6-26-97 6-26-97
- - ------------------------------- -------------------------------
Date: Date:
/s/ JODI COVAL /s/ ROBIN ANDERSON
- - ------------------------------- -------------------------------
Witness Witness
Name: Jodi Coval Name: Robin Anderson
06/26/97 6/26/97
- - ------------------------------- -------------------------------
Date: Date:
<PAGE> 1
EXHIBIT 10.4(b)
LIGHTHOUSE PUBLISHING GROUP, INC.
PUBLISHING AGREEMENT
This AGREEMENT hereby replaces in whole the Agreement entitled
"Lighthouse Publishing Group, Inc. Publishing Agreement" dated January 1, 1997,
between Wade Cook Seminars and Lighthouse Publishing Group, Inc.
This AGREEMENT is effective the 1st day of January 1997 , between Wade
B. Cook of Seattle, Washington (hereinafter called the Author) and Lighthouse
Publishing Group, Inc. , whose principal place of business is at 14675
Interurban Avenue South, Seattle, Washington, 98168-4664, (hereinafter called
the Publisher).
I. GRANT OF RIGHTS The Author hereby grants, assigns, and
transfers to the Publisher the following exclusive
rights and privileges to and in connection with a
Work, presently entitled Stock Market Miracles which
Work is a book.
A. The sole and exclusive book publication
rights in the United States, its territories,
dependencies, and possessions, the Republic of the
Philippines, and Canada, and the right to sell
copies of the Work in the open market throughout the
world.
B. The sole and exclusive subsidiary
publication and performance rights set forth in
Article VIIA below. These subsidiary publication and
performance rights are granted to the Publisher for
the United States, its territories, dependencies,
and possessions, the Republic of the Philippines,
and Canada, and include the right to authorize
others to exercise in any foreign country any of the
rights granted to the Publisher.
II. COPYRIGHT It is understood and greed that the copyright
shall be secured by the Publisher in the name of the
book and the Publisher is hereby authorized to take
all steps required to secure such copyright in the
United States of America. The Publisher agrees to
print an appropriate copyright notice in each and
every copy of the published work and to require all
parties to whom it grants licenses in connection
with the work to do the same. The party in whose
name copyright is registered shall hold for the
benefit of the other such rights as the equities
hereby created may prescribe. Unless it specifically
agrees to do so in writing, the Publisher shall not
be responsible for securing any copyright outside
the United States of America.
III. MANUSCRIPT The Author agrees to deliver to the Publisher
not later than January 31 , 1997 three finally
revised copies of the manuscript, approximately
70,000 words in length, satisfactory in form, style,
and content and acceptable to the Publisher in its
sole judgment and discretion.
FORM OF A. Unless otherwise agreed in writing, the
MANUSCRIPT Author shall furnish promptly and free of charge to
the Publisher, complete and ready for reproduction,
all drawings, maps, photographs, charts and designs
which are a part of or necessary to the text. If the
Author fails to supply any necessary drawings, maps,
photographs, charts and designs in satisfactory form
and within the specified time, the Publishers shall
have the right to have them made and the charges and
expenses of making them shall be paid for by the
Author.
B. The Publisher may, at his discretion,
cause an index to be made of the work and charge the
cost thereof against any sums due the Author
hereunder.
AUTHOR C. The provisions as to satisfaction and
COMPLIANCE acceptability to the Publisher and time of delivery
of such copy are material terms of this agreement
and upon the Author's failure to comply with any of
such provisions, the Publisher may at its option by
written notice to the Author terminate this
agreement, whereupon the Author shall return to the
Publisher all amounts which it may have advance to
him. In such event, if the manuscript should be
completed subsequently, the Author shall
nevertheless be obligated to offer the same to the
Publisher, which at its option, shall have the right
to publish the same upon the terms of the agreement.
CORRECTIONS D. If the Publisher is directed by the Author
to make alterations in any proofs from final copy
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<PAGE> 2
as delivered, which shall cost more than ten percent
of the cost of composition of the Work, the Author
agrees to pay said excess. The Author shall pay in
full for any corrections in the plates which he
requires or which are necessary for the correction
of actual errors after the plates have been made in
conformity with the last proof as corrected by the
Author. The Publisher shall upon request keep the
Author informed of such excess charges.
SUBSEQUENT E. When the Publisher considers it necessary,
REVISIONS it shall have the right in its sole discretion to
call upon the Author to revise the Work, and the
Author shall make such revisions. The provisions of
this agreement shall apply to revision of the Work
by the Author as though any such revision were the
original Work being published for the first time,
except that the manuscript of the revised Work shall
be delivered in final form by the Author to the
Publisher within a reasonable amount of time;
further, no initial payment shall be made in
connection with such revision. Should the Author not
provide the revision within a reasonable time, or
should the Author be deceased, the Publisher may
have the revision done and charge the cost of such
revision against royalties due or that may become
due the Author, and may display in the revised Work,
and in advertising, the name of the person or
persons who revised the Work.
RETYPING F. If in the opinion of the publisher it is
considered expedient to have the manuscript retyped
in as many copies as shall be necessary, the cost of
such retyping shall be borne by the Author.
PUBLISHER'S G. The Publisher shall be free to prepare the
DETERMINATION manuscript of the Work for the printer in such
manner as shall be consistent with their publishing
house style. All details as to the manner of
publication, distribution and advertising, including
the format and price of the Work in its manufactured
form and the number and distribution of free copies,
shall be left to the sole discretion of the
Publisher.
H. The Publisher will use the same care in
protecting the manuscript and other material
supplied to it hereunder as is its customary
practice in protecting similar material in its
possession, but it shall not be liable for damages,
if any, resulting from the loss or destruction of
such materials or any part thereof.
IV. ADVANCE The Publisher will pay to the Author as an
advance payment against all monies accruing to the
Author under this agreement the sum of: None
V. ROYALTIES A. The Publisher shall pay to the Author the
following royalties on regular net sales, other than
sales falling within (B) through (F) below on the
Retail selling price of each copy sold: 10% on all
copies sold.
LIMITED REPRINT B. The Publisher shall pay the Author one
EDITION half of the stipulated royalty, as stated above, on
all copies sold from a reprinting of 3,500 copies or
less, made after one year from the date of the first
publication, this reduced royalty being provided by
reason of the increased cost of manufacturing of
small reprintings, to enable the Publisher to keep
the Work in print and circulation as long as
possible.
SALE OF C. Where sheets are sold, except as a
SHEETS remainder, the percentage of royalty shall be the
same as for bound books and shall be calculated on
the net amount received by the Publisher.
FREE COPIES D. No royalties shall be paid on copies
furnished gratis to the Author, or for review,
advertising, samples or like purposes.
EXCERPTS E. The Author grants sole and exclusive
PERMISSIONS rights to the Publisher in the exercise of its
discretion, to grant permission to publish extracts
from the Work, whether or not a fee shall be
collected on the Work for such use, the Publisher
warranting to make no gratuitous grants of
permissions, except as shall, in its estimate,
advance the sale of the Work or enhance the public
esteem of the Author; the Publisher shall pay to
the Author one half of all sums of money received
as compensation for such grants of permission to
reprint extracts.
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<PAGE> 3
The Publisher is authorized to permit
publication of the Work in Braille, or
photographing, recording and/or microfilming the
Work for the physically handicapped without payment
of fees and without compensation to the Author,
providing no compensation is received by the
Publisher. In case a compensation is received, the
Publisher shall pay the Author fifty percent (50%)
of the proceeds.
VI. REMAINDERS A. If, in the opinion of the Publisher, the
- - - OVERSTOCK Work shall become unsalable in the ordinary channels
of the trade the Publisher may at its option sell
part or all of the remaining copies as "remainders"
after first informing the Author of its intention to
do so.
B. The Author shall receive a royalty of ten
percent of the amount of the Publisher's sale price
secured over the cost of production for all copies
of overstock which the Publisher deems it expedient
to sell at "remainder" prices, i.e., at less than
half of the catalog retail price, except when these
are sold at or below cost, in which case no royalty
shall be paid.
VII. SUBSIDIARY A. The further and additional rights referred
RIGHTS to in this agreement are hereby defined to include
the rights enumerated below, and are to be shared by
the Author and the Publisher in the percentage
indicated, less only such direct expenses, including
agent's commissions, as shall be incurred by the
Publisher in disposing of such rights:
<TABLE>
To Author To Publisher
<S> <C> <C> <C>
1. Abridgment, condensation, or digest.........................50% 50%
2. Anthology or quotation......................................50% 50%
3. Book clubs or similar organizations.........................50% 50%
4. Reprint.....................................................50% 50%
5. Special editions............................................50% 50%
6. Second serial and syndication (including reproduction in
compilations, magazines, newspapers, or books)..............50% 50%
</TABLE>
B. All revenue derived from the sale of
rights not specifically enumerated, whether now in
existence or hereinafter coming into existence,
shall be shared equally by the Author and the
Publisher.
C. All such rights shall be disposed of by
the sale, lease, license, or otherwise by the
Publisher who for that purpose is constituted the
attorney-in-fact of the Author. The Author agrees to
sign, make, execute, deliver and acknowledge all
such papers, documents and agreements as may be
necessary to effectuate the grants hereinabove
contemplated. In the event that the Author shall
fail to do so, they may be signed, executed,
delivered and acknowledged by the Publisher as the
attorney-in-fact of the Author with the same full
force and effect as if signed by the Author. All
sums due under this Agreement shall be paid to the
Author's agent Money Chef, Inc. or other designated
agent. whose receipt shall be a full and valid
discharge of the Publisher's obligations and who
shall act with the authority of the Author in all
matters arising out of this agreement.
IX. PUBLICATION The Publisher, in consideration of the rights
DATE granted, agrees to publish the work at its own
expense, in such style or styles as the Publisher
deems most advisable, not later than 3 months after
the Publisher's acceptance of the final revised
manuscript (except on account of late delivery of
manuscript by the Author, strikes, fires, other
contingencies beyond the control of the Publisher or
its suppliers, or advisability of postponement
because of prospective advantageous trade
conditions, in which event publication shall be
postponed.)
XI. AUTHOR'S A. The Author represents and warrants to the
WARRANTY Publisher: (a) that the work is original; (b) that
he is the sole author and proprietor thereof, and
has full power to enter into this agreement; c) that
the work has not heretofore been published in whole
or part in volume form and that he has not entered
into or become subject to any contract, agreement or
understanding with respect thereto other than this
agreement; (d) that if published it will not
infringe upon any proprietary right at common law,
or any statutory copyright, or any other right
whatsoever; and (e) that it is innocent and contains
no matter whatsoever that is obscene, libelous, in
violation of any right of privacy or otherwise in
contravention of law. The Author shall indemnify and
hold harmless the Publisher against any damage or
judgment, including court costs and attorneys' fees,
which may be sustained or recovered against the
Publisher by reason of the publication or sale of
the Work, arising from anything contained therein.
Author
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<PAGE> 4
shall also reimburse the Publisher for all expenses
including court costs, attorneys' fees and amounts
paid in settlement, sustained by the Publisher in
resisting any claim, demand, suit, action or
proceeding asserted or instituted against the
Publisher based upon the publication sale of the
Work by reason of anything contained therein.
PLAINTIFF ACTION B. The Author hereby grants to the Publisher
COPYRIGHT the right, if copyright is in the Author's name, to
ASSIGNMENT bring in the name of the Author as plaintiff or
complainant, any action or proceeding for the
enjoining of an infringement of the copyright in the
said Work and for any damages resulting therefrom,
and the net amount recovered after deducting all
expenses of suit shall be divided equally between
the Author and Publisher. The copyright shall be
assigned by either party to the other on demand,
when necessary for bringing, defending or
maintaining a copyright action under this agreement,
after the termination of which action the copyright
shall on demand be reassigned.
COMPETING C. The Author will not, without the written
WORKS consent of the Publisher, write, print, publish or
produce, or cause to be written, printed, published
or produced, during the continuance of this
contract, any other edition of said Work or any work
in any form of a similar character or title tending
to interfere with or injure the sale of the Work in
any manner.
AUTHOR'S D. The Author agrees, in the event that the
PERMISSION Author plans to incorporate in the Work any writings
or composition previously published elsewhere, to
obtain and deliver to the Publisher proper and
complete written permission and authorization to
reprint same from the owner of the copyright
covering same.
XII. In case the Publisher fails to keep said Work
WITHDRAWAL in print and for sale and after written demand from
OF WORK the Author, declines or neglects to reprint the work
within six months and to offer it for sale, or in
the event that, after one year from the date of the
first publication, the Work in the opinion of the
Publisher is no longer merchantable or profitable,
and it gives one month's notice to the Author of its
desire and intention to discontinue publication,
this contract shall terminate and all rights
preserved, with any plates of illustrations
furnished by the Author and any remaining copies and
sheets shall be transferred to the Author, provided
that Author shall pay the manufacturing costs
(including composition) of such plates and the
manufacturing cost of such remaining copies or
sheets, in default of which payments the Publisher
shall have the rights to destroy any plates and to
sell remaining copies or sheets at cost of less,
without payment of royalty to the Author upon such
copies or sheets. In case of the termination of the
contract, if the copyright is in the name of the
Publisher it shall assign said copyright to the
Author.
The Work shall not be considered to be out of
print if it is on public sale in any printed
edition, in the United States, or if there shall be
in existence a contract for cheap edition
publication which provides for publication within
six (6) months after the work is out of print in the
regular edition.
XIII. BANKRUPTCY A. If a petition in bankruptcy (as
distinguished from reorganization or arrangement)
shall be filed by the Publisher, or shall be filed
against the Publisher and finally sustained, the
Author shall have right to buy back, at his option,
to be exercised in thirty days, the rights of
publication at their fair market value, to be
determined by agreement, together with any plates or
remaining copies of sheets, at their fair market
value, this also to be determined by agreement, and
thereupon this contract shall terminate. However, no
reversion of rights under this clause shall take
place until after the Author has repaid to the
Publisher any indebtedness incurred by him and still
outstanding under this agreement. If this agreement
contains a clause of option on future books by the
Author, such clause shall become null and void in
event of the Publisher's bankruptcy or receivership.
AUTHOR'S B. The Author, upon his written request,
EXAMINATION shall have the right to examine or cause to be
examined through certified public accountants the
books of account of the Publisher insofar as such
books of account shall relate to the Work. If such
examination shall reveal errors of accounting (other
than those arising from an interpretation of this
agreement) amounting to a sum in excess of ten
percent of the total royalties earned in the period
under examination to the Author's disadvantage, the
costs of such examination shall be borne by the
Publisher, otherwise such costs shall be borne by
the Author.
XIV. SEMI- The Publisher agrees to render semi-annual
statements of account to March 31st and
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ANNUAL September 30th of each year, on the succeeding July
STATEMENTS PAYMENTS 1st and January 1st and to make settlements in cash
or about said last mentioned dates. In making
accountings, the Publisher shall have the right to
allow for a reasonable reserve against returns and
nonpayment of invoices for copies billed out by the
Publisher.
XV. AUTHOR'S The Publisher agrees to present to the Author
COPIES 100 (one hundred) free copies of said Work upon
publication, and to permit the Author to purchase
from it further copies for its own personal use, at
a discount of forty percent off list price. Author
shall be billed directly for these copies, and shall
make payment therefor within 30 days of invoice
date. No consignment sales shall be made to Author.
Author shall not receive royalties on sales made to
him.
XVI. RECOVERABLE All payments made by Publisher to the Author,
PAYMENTS whether under this agreement or not, shall be
chargeable against and recoverable from any or all
monies accruing to the Author under this contract
and for all other contracts between the parties or
their assigns.
XVIII. TAX It is mutually agreed that State, Federal,
WITHHOLDING and Foreign taxes on the Author's earnings, when
paid by the Publisher, are proper charges against
the Author's earnings due under this agreement, and
may be withheld by the Publisher.
XVIII. This agreement shall be binding upon and
ASSIGNMENT shall ensure to the benefit of the parties hereto,
their successors, assigns, executors, administrators
and/or personal representatives and may be assigned
by either party hereto, except that no assignment by
the Author shall be valid against the Publisher
unless the Publisher has received written notice
therefrom from the Author and has consented to the
same in writing.
XIX. Any controversy or claim arising out of this
ARBITRATION agreement or the breach thereof shall be settled by
arbitration in accordance with rules then obtaining
of the American Arbitration Association, and
judgment upon the award may be entered in the
highest court of the form, State or Federal, having
jurisdiction. Such arbitration shall be held in the
City of Seattle, Washington, unless otherwise agreed
by the parties. The Author may at his option, in
case of failure to pay royalties, refuse to
arbitrate, and pursue his legal remedies.
XX. Any written notice required under any of the
NOTICES provisions of this agreement shall be deemed to have
been properly served by delivery in person or by
mailing the same to the parties hereto at the
addresses set forth above, except as the addresses
may be changed by notice in writing; provided,
however, that notices of termination shall be sent
by registered mail.
XXI. A waiver of any breach of this agreement or
WAIVER of any of the terms or conditions by either party
thereto shall not be deemed a waiver of any
repetition of such breach or in any wise affect any
other terms or conditions hereof; no waiver shall be
valid or binding unless it shall be in writing, and
signed by the parties.
XXII. DELIVERY OF This agreement shall not be binding on either
CONTRACT the Publisher or the Author unless it is signed by
both parties and delivered to the Publisher within a
period of two months from the date of the agreement.
The changes, alterations and interlineations made in Articles VII, X, XVI of
this contract and the additional Articles numbered NONE made and added before
execution hereof.
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IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
respective hands and seals the day and year first above written.
LIGHTHOUSE PUBLISHING GROUP, INC.
/s/ JERALD MILLER /s/ WADE B. COOK
- - ------------------------------- --------------------------------
By: Jerald Miller Wade B. Cook, Author
6/26/97 6/26/97
- - ------------------------------- --------------------------------
Date: Date:
/s/ JODI COVAL /s/ ROBIN ANDERSON
- - ------------------------------- --------------------------------
Witness Jodi Coval Witness
Name: Name:
6/26/97 6/26/97
- - ------------------------------- --------------------------------
Date: Date:
Page 6
<PAGE> 1
EXHIBIT 10.5
LIGHTHOUSE PUBLISHING GROUP, INC.
PUBLISHING AGREEMENT
This AGREEMENT is effective the 1st day of March 1997, between Wade B.
Cook of Seattle, Washington (hereinafter called the Author) and Lighthouse
Publishing Group, Inc. , whose principal place of business is at 14675
Interurban Avenue South, Seattle, Washington, 98168-4664, (hereinafter called
the Publisher).
I. GRANT OF The Author hereby grants, assigns, and transfers to the
RIGHTS Publisher the following exclusive rights and privileges to
and in connection with a Work, presently entitled Bear
Market Balony which Work is a book.
A. The sole and exclusive book publication rights in
the United States, its territories, dependencies, and
possessions, the Republic of the Philippines, and Canada,
and the right to sell copies of the Work in the open market
throughout the world.
B. The sole and exclusive subsidiary publication and
performance rights set forth in Article VIIA below. These
subsidiary publication and performance rights are granted to
the Publisher for the United States, its territories,
dependencies, and possessions, the Republic of the
Philippines, and Canada, and include the right to authorize
others to exercise in any foreign country any of the rights
granted to the Publisher.
II. COPYRIGHT It is understood and greed that the copyright shall be
secured by the Publisher in the name of the book and the
Publisher is hereby authorized to take all steps required to
secure such copyright in the United States of America. The
Publisher agrees to print an appropriate copyright notice in
each and every copy of the published work and to require all
parties to whom it grants licenses in connection with the
work to do the same. The party in whose name copyright is
registered shall hold for the benefit of the other such
rights as the equities hereby created may prescribe. Unless
it specifically agrees to do so in writing, the Publisher
shall not be responsible for securing any copyright outside
the United States of America.
III. MANUSCRIPT The Author agrees to deliver to the Publisher not
later than March 28, 1997 three finally revised copies of
the manuscript, approximately 70,000 words in length,
satisfactory in form, style, and content and acceptable to
the Publisher in its sole judgment and discretion.
FORM OF A. Unless otherwise agreed in writing, the Author
MANUSCRIPT shall furnish promptly and free of charge to the Publisher,
complete and ready for reproduction, all drawings, maps,
photographs, charts and designs which are a part of or
necessary to the text. If the Author fails to supply any
necessary drawings, maps, photographs, charts and designs in
satisfactory form and within the specified time, the
Publishers shall have the right to have them made and the
charges and expenses of making them shall be paid for by the
Author.
B. The Publisher may, at his discretion, cause an
index to be made of the work and charge the cost thereof
against any sums due the Author hereunder.
AUTHOR C. The provisions as to satisfaction and acceptability
COMPLIANCE to the Publisher and time of delivery of such copy are
material terms of this agreement and upon the Author's
failure to comply with any of such provisions, the Publisher
may at its option by written notice to the Author terminate
this agreement, whereupon the Author shall return to the
Publisher all amounts which it may have advance to him. In
such event, if the manuscript should be completed
subsequently, the Author shall nevertheless be obligated to
offer the same to the Publisher, which at its option, shall
have the right to publish the same upon the terms of the
agreement.
CORRECTIONS D. If the Publisher is directed by the Author to make
alterations in any proofs from final copy as delivered,
which shall cost more than ten percent of the cost of
composition of the Work, the Author agrees to pay said
excess. The Author shall pay in full for any corrections in
the plates which
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he requires or which are necessary for the correction of
actual errors after the plates have been made in conformity
with the last proof as corrected by the Author. The
Publisher shall upon request keep the Author informed of
such excess charges.
SUBSEQUENT E. When the Publisher considers it necessary, it shall
REVISIONS have the right in its sole discretion to call upon the
Author to revise the Work, and the Author shall make such
revisions. The provisions of this agreement shall apply to
revision of the Work by the Author as though any such
revision were the original Work being published for the
first time, except that the manuscript of the revised Work
shall be delivered in final form by the Author to the
Publisher within a reasonable amount of time; further, no
initial payment shall be made in connection with such
revision. Should the Author not provide the revision within
a reasonable time, or should the Author be deceased, the
Publisher may have the revision done and charge the cost of
such revision against royalties due or that may become due
the Author, and may display in the revised Work, and in
advertising, the name of the person or persons who revised
the Work.
RETYPING F. If in the opinion of the publisher it is
considered expedient to have the manuscript retyped in as
many copies as shall be necessary, the cost of such retyping
shall be borne by the Author.
PUBLISHER'S G. The Publisher shall be free to prepare the
DETERMINA- manuscript of the Work for the printer in such manner as
TION shall be consistent with their publishing house style. All
details as to the manner of publication, distribution and
advertising, including the format and price of the Work in
its manufactured form and the number and distribution of
free copies, shall be left to the sole discretion of the
Publisher.
H. The Publisher will use the same care in protecting
the manuscript and other material supplied to it hereunder
as is its customary practice in protecting similar material
in its possession, but it shall not be liable for damages,
if any, resulting from the loss or destruction of such
materials or any part thereof.
IV. ADVANCE The Publisher will pay to the Author as an advance
payment against all monies accruing to the Author under this
agreement the sum of: None
V. ROYALTIES A. The Publisher shall pay to the Author the following
royalties on regular net sales, other than sales falling
within (B) through (F) below on the Retail selling price of
each copy sold: 10% on all copies sold.
LIMITED B. The Publisher shall pay the Author one half of the
REPRINT stipulated royalty, as stated above, on all copies sold from
EDITION a reprinting of 3,500 copies or less, made after one year
from the date of the first publication, this reduced royalty
being provided by reason of the increased cost of
manufacturing of small reprintings, to enable the Publisher
to keep the Work in print and circulation as long as
possible.
SALE OF C. Where sheets are sold, except as a remainder, the
SHEETS percentage of royalty shall be the same as for bound books
and shall be calculated on the net amount received by the
Publisher.
FREE COPIES D. No royalties shall be paid on copies furnished
gratis to the Author, or for review, advertising, samples or
like purposes.
EXCERPTS E. The Author grants sole and exclusive rights to the
PERMISSIONS Publisher in the exercise of its discretion, to grant
permission to publish extracts from the Work, whether or not
a fee shall be collected on the Work for such use, the
Publisher warranting to make no gratuitous grants of
permissions, except as shall, in its estimate, advance the
sale of the Work or enhance the public esteem of the Author;
the Publisher shall pay to the Author one half of all sums
of money received as compensation for such grants of
permission to reprint extracts.
The Publisher is authorized to permit publication of
the Work in Braille, or photographing, recording and/or
microfilming the Work for the physically handicapped without
payment of fees and
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<PAGE> 3
without compensation to the Author, providing no
compensation is received by the Publisher. In case a
compensation is received, the Publisher shall pay the Author
fifty percent (50%) of the proceeds.
VI. REMAINDERS - A. If, in the opinion of the Publisher, the Work shall
OVERSTOCK Publisher may at its option sell part or all of the
remaining copies as "remainders" after first informing the
Author of its intention to do so.
B. The Author shall receive a royalty of ten percent
of the amount of the Publisher's sale price secured over the
cost of production for all copies of overstock which the
Publisher deems it expedient to sell at "remainder" prices,
i.e., at less than half of the catalog retail price, except
when these are sold at or below cost, in which case no
royalty shall be paid.
VII. SUBSIDIARY A. The further and additional rights referred to in
RIGHTS this agreement are hereby defined to include the rights
enumerated below, and are to be shared by the Author and the
Publisher in the percentage indicated, less only such direct
expenses, including agent's commissions, as shall be
incurred by the Publisher in disposing of such rights:
<TABLE>
<CAPTION>
To Author To Publisher
<S> <C> <C>
1. Abridgment, condensation, or digest.............. 50% 50%
2. Anthology or quotation........................... 50% 50%
3. Book clubs or similar organizations.............. 50% 50%
4. Reprint.......................................... 50% 50%
5. Special editions................................. 50% 50%
6. Second serial and syndication (including
reproduction in compilations, magazines,
newspapers, or books)............................ 50% 50%
</TABLE>
B. All revenue derived from the sale of rights not
specifically enumerated, whether now in existence or
hereinafter coming into existence, shall be shared equally
by the Author and the Publisher.
C. All such rights shall be disposed of by the sale,
lease, license, or otherwise by the Publisher who for that
purpose is constituted the attorney-in-fact of the Author.
The Author agrees to sign, make, execute, deliver and
acknowledge all such papers, documents and agreements as may
be necessary to effectuate the grants hereinabove
contemplated. In the event that the Author shall fail to do
so, they may be signed, executed, delivered and acknowledged
by the Publisher as the attorney-in-fact of the Author with
the same full force and effect as if signed by the Author.
All sums due under this Agreement shall be paid to the
Author's agent Money Chef, Inc. or other designated agent.
whose receipt shall be a full and valid discharge of the
Publisher's obligations and who shall act with the authority
of the Author in all matters arising out of this agreement.
IX. PUBLICATION The Publisher, in consideration of the rights granted,
DATE agrees to publish the work at its own expense, in such style
or styles as the Publisher deems most advisable, not later
than 3 months after the Publisher's acceptance of the final
revised manuscript (except on account of late delivery of
manuscript by the Author, strikes, fires, other
contingencies beyond the control of the Publisher or its
suppliers, or advisability of postponement because of
prospective advantageous trade conditions, in which event
publication shall be postponed.)
XI. AUTHOR'S A. The Author represents and warrants to the
WARRANTY Publisher: (a) that the work is original; (b) that he is the
sole author and proprietor thereof, and has full power to
enter into this agreement; c) that the work has not
heretofore been published in whole or part in volume form
and that he has not entered into or become subject to any
contract, agreement or understanding with respect thereto
other than this agreement; (d) that if published it will not
infringe upon any proprietary right at common law, or any
statutory copyright, or any other right whatsoever; and (e)
that it is innocent and contains no matter whatsoever that
is obscene, libelous, in violation of any right of privacy
or otherwise in contravention of law. The Author shall
indemnify and hold harmless the Publisher against any damage
or judgment, including court costs and attorneys' fees,
which may be sustained or recovered against the Publisher by
reason of the publication or sale of the Work, arising from
anything contained therein. Author shall also reimburse the
Publisher for all expenses including court costs, attorneys'
fees and amounts paid in settlement, sustained by the
Publisher in resisting any claim, demand, suit, action or
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<PAGE> 4
proceeding asserted or instituted against the Publisher
based upon the publication sale of the Work by reason of
anything contained therein.
PLAINTIFF B. The Author hereby grants to the Publisher the right,
ACTION if copyright is in the Author's name, to bring in the name
COPYRIGHT of the Author as plaintiff or complainant, any action or
ASSIGNMENT proceeding for the enjoining of an infringement of the
copyright in the said Work and for any damages resulting
therefrom, and the net amount recovered after deducting all
expenses of suit shall be divided equally between the Author
and Publisher. The copyright shall be assigned by either
party to the other on demand, when necessary for bringing,
defending or maintaining a copyright action under this
agreement, after the termination of which action the
copyright shall on demand be reassigned.
COMPETING C. The Author will not, without the written consent of
WORKS the Publisher, write, print, publish or produce, or cause to
be written, printed, published or produced, during the
continuance of this contract, any other edition of said Work
or any work in any form of a similar character or title
tending to interfere with or injure the sale of the Work in
any manner.
AUTHOR'S D. The Author agrees, in the event that the Author
PERMISSION plans to incorporate in the Work any writings or composition
previously published elsewhere, to obtain and deliver to the
Publisher proper and complete written permission and
authorization to reprint same from the owner of the
copyright covering same.
XII.
WITHDRAWAL In case the Publisher fails to keep said Work in print
OF WORK and for sale and after written demand from the Author,
declines or neglects to reprint the work within six months
and to offer it for sale, or in the event that, after one
year from the date of the first publication, the Work in the
opinion of the Publisher is no longer merchantable or
profitable, and it gives one month's notice to the Author of
its desire and intention to discontinue publication, this
contract shall terminate and all rights preserved, with any
plates of illustrations furnished by the Author and any
remaining copies and sheets shall be transferred to the
Author, provided that Author shall pay the manufacturing
costs (including composition) of such plates and the
manufacturing cost of such remaining copies or sheets, in
default of which payments the Publisher shall have the
rights to destroy any plates and to sell remaining copies or
sheets at cost of less, without payment of royalty to the
Author upon such copies or sheets. In case of the
termination of the contract, if the copyright is in the name
of the Publisher it shall assign said copyright to the
Author.
The Work shall not be considered to be out of print if
it is on public sale in any printed edition, in the United
States, or if there shall be in existence a contract for
cheap edition publication which provides for publication
within six (6) months after the work is out of print in the
regular edition.
XIII.
BANKRUPTCY A. If a petition in bankruptcy (as distinguished from
reorganization or arrangement) shall be filed by the
Publisher, or shall be filed against the Publisher and
finally sustained, the Author shall have right to buy back,
at his option, to be exercised in thirty days, the rights of
publication at their fair market value, to be determined by
agreement, together with any plates or remaining copies of
sheets, at their fair market value, this also to be
determined by agreement, and thereupon this contract shall
terminate. However, no reversion of rights under this clause
shall take place until after the Author has repaid to the
Publisher any indebtedness incurred by him and still
outstanding under this agreement. If this agreement contains
a clause of option on future books by the Author, such
clause shall become null and void in event of the
Publisher's bankruptcy or receivership.
AUTHOR'S B. The Author, upon his written request, shall have the
EXAMINATION right to examine or cause to be examined through certified
public accountants the books of account of the Publisher
insofar as such books of account shall relate to the Work.
If such examination shall reveal errors of accounting (other
than those arising from an interpretation of this agreement)
amounting to a sum in excess of ten percent of the total
royalties earned in the period under examination to the
Author's disadvantage, the costs of such examination shall
be borne by the Publisher, otherwise such costs shall be
borne by the Author.
XIV. SEMI- The Publisher agrees to render semi-annual statements
ANNUAL of account to March 31st and September 30th of each year,
STATEMENTS on the succeeding July 1st and January 1st and to make
settlements in cash or about said last mentioned dates. In
making accountings, the Publisher shall have the right to
allow
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<PAGE> 5
PAYMENTS for a reasonable reserve against returns and nonpayment of
invoices for copies billed out by the Publisher.
XV. AUTHOR'S The Publisher agrees to present to the Author 100 (one
COPIES hundred) free copies of said Work upon publication, and to
permit the Author to purchase from it further copies for its
own personal use, at a discount of forty percent off list
price. Author shall be billed directly for these copies, and
shall make payment therefor within 30 days of invoice date.
No consignment sales shall be made to Author. Author shall
not receive royalties on sales made to him.
XVI. All payments made by Publisher to the Author, whether
RECOVERABLE under this agreement or not, shall be chargeable against and
PAYMENTS recoverable from any or all monies accruing to the Author
under this contract and for all other contracts between the
parties or their assigns.
XVIII. TAX It is mutually agreed that State, Federal, and Foreign
WITHHOLDING taxes on the Author's earnings, when paid by the Publisher,
are proper charges against the Author's earnings due under
this agreement, and may be withheld by the Publisher.
XVIII. This agreement shall be binding upon and shall ensure
ASSIGNMENT to the benefit of the parties hereto, their successors,
assigns, executors, administrators and/or personal
representatives and may be assigned by either party hereto,
except that no assignment by the Author shall be valid
against the Publisher unless the Publisher has received
written notice therefrom from the Author and has consented
to the same in writing.
XIX. Any controversy or claim arising out of this agreement
ARBITRATION or the breach thereof shall be settled by arbitration in
accordance with rules then obtaining of the American
Arbitration Association, and judgment upon the award may be
entered in the highest court of the form, State or Federal,
having jurisdiction. Such arbitration shall be held in the
City of Seattle, Washington, unless otherwise agreed by the
parties. The Author may at his option, in case of failure to
pay royalties, refuse to arbitrate, and pursue his legal
remedies.
XX. NOTICES Any written notice required under any of the
provisions of this agreement shall be deemed to have been
properly served by delivery in person or by mailing the same
to the parties hereto at the addresses set forth above,
except as the addresses may be changed by notice in writing;
provided, however, that notices of termination shall be sent
by registered mail.
XXI. WAIVER A waiver of any breach of this agreement or of any of
the terms or conditions by either party thereto shall not be
deemed a waiver of any repetition of such breach or in any
wise affect any other terms or conditions hereof; no waiver
shall be valid or binding unless it shall be in writing, and
signed by the parties.
XXII. DELIVERY This agreement shall not be binding on either the
OF CONTRACT Publisher or the Author unless it is signed by both parties
and delivered to the Publisher within a period of two months
from the date of the agreement.
The changes, alterations and interlineations made in Articles VII, X, XVI of
this contract and the additional Articles numbered NONE made and added before
execution hereof.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
respective hands and seals the day and year first above written.
LIGHTHOUSE PUBLIISHING GROUP, INC.
/s/ JERALD MILLER /s/ WADE B. COOK
- - ----------------------------------- -----------------------------------
By: Jerald Miller Wade B. Cook, Author
6-26-97 6-26-97
- - ----------------------------------- -----------------------------------
Date: Date:
/s/ JODI COVAL /s/ BRANDEE GIBSON
- - ----------------------------------- -----------------------------------
Witness Witness
Name: Jodi Coval Name: Brandee Gibson
6-26-97 6-26-97
- - ----------------------------------- -----------------------------------
Date: Date:
Page 6
<PAGE> 1
EXHIBIT 10.6
LIGHTHOUSE PUBLISHING GROUP, INC.
PUBLISHING AGREEMENT
This AGREEMENT is effective the 1st day of May 1997 , between Wade B.
Cook of Seattle, Washington (hereinafter called the Author) and Lighthouse
Publishing Group, Inc. , whose principal place of business is at 14675
Interurban Avenue South, Seattle, Washington, 98168-4664, (hereinafter called
the Publisher).
I. GRANT OF The Author hereby grants, assigns, and transfers to the
RIGHTS Publisher the following exclusive rights and privileges to
and in connection with a Work, presently entitled Business
Buy The Bible which Work is a book.
A. The sole and exclusive book publication rights in the
United States, its territories, dependencies, and
possessions, the Republic of the Philippines, and Canada,
and the right to sell copies of the Work in the open market
throughout the world.
B. The sole and exclusive subsidiary publication and
performance rights set forth in Article VIIA below. These
subsidiary publication and performance rights are granted to
the Publisher for the United States, its territories,
dependencies, and possessions, the Republic of the
Philippines, and Canada, and include the right to authorize
others to exercise in any foreign country any of the rights
granted to the Publisher.
II. COPYRIGHT It is understood and greed that the copyright shall be
secured by the Publisher in the name of the book and the
Publisher is hereby authorized to take all steps required to
secure such copyright in the United States of America. The
Publisher agrees to print an appropriate copyright notice in
each and every copy of the published work and to require all
parties to whom it grants licenses in connection with the
work to do the same. The party in whose name copyright is
registered shall hold for the benefit of the other such
rights as the equities hereby created may prescribe. Unless
it specifically agrees to do so in writing, the Publisher
shall not be responsible for securing any copyright outside
the United States of America.
III. MANUSCRIPT The Author agrees to deliver to the Publisher not later than
May 28 , 1997 three finally revised copies of the
manuscript, approximately 70,000 words in length,
satisfactory in form, style, and content and acceptable to
the Publisher in its sole judgment and discretion.
FORM OF A. Unless otherwise agreed in writing, the Author shall
MANUSCRIPT furnish promptly and free of charge to the Publisher,
complete and ready for reproduction, all drawings, maps,
photographs, charts and designs which are a part of or
necessary to the text. If the Author fails to supply any
necessary drawings, maps, photographs, charts and designs in
satisfactory form and within the specified time, the
Publishers shall have the right to have them made and the
charges and expenses of making them shall be paid for by the
Author.
B. The Publisher may, at his discretion, cause an index
to be made of the work and charge the cost thereof against
any sums due the Author hereunder.
AUTHOR C. The provisions as to satisfaction and acceptability
COMPLIANCE to the Publisher and time of delivery of such copy are
material terms of this agreement and upon the Author's
failure to comply with any of such provisions, the Publisher
may at its option by written notice to the Author terminate
this agreement, whereupon the Author shall return to the
Publisher all amounts which it may have advance to him. In
such event, if the manuscript should be completed
subsequently, the Author shall nevertheless be obligated to
offer the same to the Publisher, which at its option, shall
have the right to publish the same upon the terms of the
agreement.
CORRECTIONS D. If the Publisher is directed by the Author to make
alterations in any proofs from final copy as delivered,
which shall cost more than ten percent of the cost of
composition of the Work, the Author agrees to pay said
excess. The Author shall pay in full for any corrections in
the plates which
Page 1
<PAGE> 2
he requires or which are necessary for the correction of
actual errors after the plates have been made in conformity
with the last proof as corrected by the Author. The
Publisher shall upon request keep the Author informed of
such excess charges.
SUBSEQUENT E. When the Publisher considers it necessary, it shall
REVISIONS have the right in its sole discretion to call upon the
Author to revise the Work, and the Author shall make such
revisions. The provisions of this agreement shall apply to
revision of the Work by the Author as though any such
revision were the original Work being published for the
first time, except that the manuscript of the revised Work
shall be delivered in final form by the Author to the
Publisher within a reasonable amount of time; further, no
initial payment shall be made in connection with such
revision. Should the Author not provide the revision within
a reasonable time, or should the Author be deceased, the
Publisher may have the revision done and charge the cost of
such revision against royalties due or that may become due
the Author, and may display in the revised Work, and in
advertising, the name of the person or persons who revised
the Work.
RETYPING F. If in the opinion of the publisher it is considered
expedient to have the manuscript retyped in as many copies
as shall be necessary, the cost of such retyping shall be
borne by the Author.
PUBLISHER'S G. The Publisher shall be free to prepare the
DETERMINA- manuscript of the Work for the printer in such manner as
NATION shall be consistent with their publishing house style. All
details as to the manner of publication, distribution and
advertising, including the format and price of the Work in
its manufactured form and the number and distribution of
free copies, shall be left to the sole discretion of the
Publisher.
H. The Publisher will use the same care in protecting
the manuscript and other material supplied to it hereunder
as is its customary practice in protecting similar material
in its possession, but it shall not be liable for damages,
if any, resulting from the loss or destruction of such
materials or any part thereof.
IV. ADVANCE The Publisher will pay to the Author as an advance
payment against all monies accruing to the Author under this
agreement the sum of: None
V. ROYALTIES A. The Publisher shall pay to the Author the following
royalties on regular net sales, other than sales falling
within (B) through (F) below on the Retail selling price of
each copy sold: 10% on all copies sold.
LIMITED REPRINT B. The Publisher shall pay the Author one half of the
EDITION stipulated royalty, as stated above, on all copies sold from
a reprinting of 3,500 copies or less, made after one year
from the date of the first publication, this reduced royalty
being provided by reason of the increased cost of
manufacturing of small reprintings, to enable the Publisher
to keep the Work in print and circulation as long as
possible.
SALE OF C. Where sheets are sold, except as a remainder, the
SHEETS percentage of royalty shall be the same as for bound books
and shall be calculated on the net amount received by the
Publisher.
FREE COPIES D. No royalties shall be paid on copies furnished
gratis to the Author, or for review, advertising, samples
or like purposes.
EXCERPTS E. The Author grants sole and exclusive rights to the
PERMISSIONS Publisher in the exercise of its discretion, to grant
permission to publish extracts from the Work, whether or not
a fee shall be collected on the Work for such use, the
Publisher warranting to make no gratuitous grants of
permissions, except as shall, in its estimate, advance the
sale of the Work or enhance the public esteem of the Author;
the Publisher shall pay to the Author one half of all sums
of money received as compensation for such grants of
permission to reprint extracts.
The Publisher is authorized to permit publication of
the Work in Braille, or photographing, recording and/or
microfilming the Work for the physically handicapped without
payment of fees and
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<PAGE> 3
without compensation to the Author, providing no
compensation is received by the Publisher. In case a
compensation is received, the Publisher shall pay the Author
fifty percent (50%) of the proceeds.
VI. REMAINDERS - A. If, in the opinion of the Publisher, the Work shall
OVERSTOCK become unsalable in the ordinary channels of the trade the
Publisher may at its option sell part or all of the
remaining copies as "remainders" after first informing the
Author of its intention to do so.
B. The Author shall receive a royalty of ten percent of
the amount of the Publisher's sale price secured over the
cost of production for all copies of overstock which the
Publisher deems it expedient to sell at "remainder" prices,
i.e., at less than half of the catalog retail price, except
when these are sold at or below cost, in which case no
royalty shall be paid.
VII. SUBSIDIARY A. The further and additional rights referred to in
RIGHTS this agreement are hereby defined to include the rights
enumerated below, and are to be shared by the Author and the
Publisher in the percentage indicated, less only such direct
expenses, including agent's commissions, as shall be
incurred by the Publisher in disposing of such rights:
<TABLE>
<CAPTION>
To Author To Publisher
<S> <C> <C>
1. Abridgment, condensation, or digest...................... 50% 50%
2. Anthology or quotation................................... 50% 50%
3. Book clubs or similar organizations...................... 50% 50%
4. Reprint.................................................. 50% 50%
5. Special editions......................................... 50% 50%
6. Second serial and syndication (including reproduction
in compilations, magazines, newspapers, or books)........ 50% 50%
</TABLE>
B. All revenue derived from the sale of rights not
specifically enumerated, whether now in existence or
hereinafter coming into existence, shall be shared equally
by the Author and the Publisher.
C. All such rights shall be disposed of by the sale,
lease, license, or otherwise by the Publisher who for that
purpose is constituted the attorney-in-fact of the Author.
The Author agrees to sign, make, execute, deliver and
acknowledge all such papers, documents and agreements as may
be necessary to effectuate the grants hereinabove
contemplated. In the event that the Author shall fail to do
so, they may be signed, executed, delivered and acknowledged
by the Publisher as the attorney-in-fact of the Author with
the same full force and effect as if signed by the Author.
All sums due under this Agreement shall be paid to the
Author's agent Money Chef, Inc. or other designated agent.
whose receipt shall be a full and valid discharge of the
Publisher's obligations and who shall act with the authority
of the Author in all matters arising out of this agreement.
IX. PUBLICATION The Publisher, in consideration of the rights granted,
DATE agrees to publish the work at its own expense, in such style
or styles as the Publisher deems most advisable, not later
than 3 months after the Publisher's acceptance of the final
revised manuscript (except on account of late delivery of
manuscript by the Author, strikes, fires, other
contingencies beyond the control of the Publisher or its
suppliers, or advisability of postponement because of
prospective advantageous trade conditions, in which event
publication shall be postponed.)
XI. AUTHOR'S A. The Author represents and warrants to the Publisher:
WARRANTY (a) that the work is original; (b) that he is the sole
author and proprietor thereof, and has full power to enter
into this agreement; c) that the work has not heretofore
been published in whole or part in volume form and that he
has not entered into or become subject to any contract,
agreement or understanding with respect thereto other than
this agreement; (d) that if published it will not infringe
upon any proprietary right at common law, or any statutory
copyright, or any other right whatsoever; and (e) that it is
innocent and contains no matter whatsoever that is obscene,
libelous, in violation of any right of privacy or otherwise
in contravention of law. The Author shall indemnify and hold
harmless the Publisher against any damage or judgment,
including court costs and attorneys' fees, which may be
sustained or recovered against the Publisher by reason of
the publication or sale of the Work, arising from anything
contained therein. Author shall also reimburse the Publisher
for all expenses including court costs, attorneys' fees and
amounts paid in settlement, sustained by the Publisher in
resisting any claim, demand, suit, action or
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<PAGE> 4
proceeding asserted or instituted against the Publisher
based upon the publication sale of the Work by reason of
anything contained therein.
PLAINTIFF ACTION B. The Author hereby grants to the Publisher the right,
COYRIGHT if copyright is in the Author's name, to bring in the name
ASSIGNMENT of the Author as plaintiff or complainant, any action or
proceeding for the enjoining of an infringement of the
copyright in the said Work and for any damages resulting
therefrom, and the net amount recovered after deducting all
expenses of suit shall be divided equally between the Author
and Publisher. The copyright shall be assigned by either
party to the other on demand, when necessary for bringing,
defending or maintaining a copyright action under this
agreement, after the termination of which action the
copyright shall on demand be reassigned.
COMPETING C. The Author will not, without the written consent
WORKS of the Publisher, write, print, publish or produce, or cause
to be written, printed, published or produced, during the
continuance of this contract, any other edition of said Work
or any work in any form of a similar character or title
tending to interfere with or injure the sale of the Work in
any manner.
AUTHOR'S D. The Author agrees, in the event that the Author
PERMISSION plans to incorporate in the Work any writings or composition
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XIII. BANKRUPTCY A. If a petition in bankruptcy (as distinguished from
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allow
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<PAGE> 5
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IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
respective hands and seals the day and year first above written.
LIGHTHOUSE PUBLISHING GROUP, INC.
/s/ JERALD MILLER /s/ WADE B. COOK
- - --------------------------------------- ----------------------------------
By: Jerald Miller Wade B. Cook, Author
6/26/97
- - --------------------------------------- ----------------------------------
Date: Date:
/s/ JODI COAL /s/ ROBIN ANDERSON
- - --------------------------------------- ----------------------------------
Witness Witness
Name: Jodi Coal Name:
6/26/97 6/26/97
- - --------------------------------------- ----------------------------------
Date: Date:
Page 6
<PAGE> 1
EXHIBIT 10.7
COMMERCIAL AND INVESTMENT REAL ESTATE
PURCHASE AND SALE AGREEMENT
Date July 4, 1996
The undersigned Buyer, United Support Association, Inc. (Nevada Corporation),
agrees to buy and Seller agrees to sell, on the following terms, the real
property and all improvements thereon (collectively, the "Property") commonly
known as 14675 Interurban Avenue, in the City of Tukwila, King County,
Washington, legally described as: SEE EXHIBIT A.
(Buyer and Seller authorize the Listing Agent, Selling Licensee, or Closing
Agents to insert and/or correct, over their signatures, the legal description of
the Property.)
1. PURCHASE PRICE. The total purchase price is Three Million Three Hundred
Thousand and No/100 Dollars ($3,300,000.00), including the earnest money,
payable as follows:
[ ] all cash at closing, including the earnest money, with no financing
contingency.
[ ] all cash at closing, including the earnest money, contingent on new
financing under Section 4a below.
[X] $750,00 of the purchase price in cash at closing, including the
earnest money, with the balance of the purchase price paid as
follows (check only one):
[ ] Buyer's assumption of any underlying note and deed of trust,
or real estate contract, under Section 4b below;
[X] Buyer's delivery at closing of a promissory note for the
balance of the purchase price, secured by a deed of trust
encumbering the Property, as described in Section 4c below;
[ ] Buyer's delivery at closing of real estate contract for the
balance of the purchase price as described in Section 4c
below.
[ ] Other.
2. EARNEST MONEY RECEIPT. Selling Licensee acknowledges receipt from Buyer of
$200,000 earnest money, in the form of [ ] Cash [ ] Personal check
[X] Promissory note due upon contingency removal [ ] Other ____________,
to be held [ ] by Closing Agent [ ] in Selling Licensee's pooled trust
account (with interest paid to the Washington Housing Fund). Selling
Licensee may, however, transfer the earnest money to Closing Agent.
If the earnest money is to be held by Selling Licensee and is over $5,000,
it shall be deposited to: [ ] Selling Licensee's pooled trust account
[ ] A separate trust account in Selling Licensee's name, with the interest
credited at closing to Buyer whose Social Security (or taxpayer ID) Number
is ________________. If this sale fails to close, whoever is entitled to
the earnest money is entitled to interest.
Selling Licensee shall not deposit any check until mutual acceptance of
this Agreement. Buyer agrees to pay financing and purchase costs incurred
by Buyer. If all or part of the earnest money is to be returned to Buyer
and any such costs remain unpaid, Selling Licensee may deduct and pay them
therefrom.
3. ADDENDUMS. The following addendums are attached hereto:
[ ] None [X] No. 1.
4. FINANCING.
[Text intentionally omitted.]
(Note to Buyer and Seller: If the Property is currently used primarily for
farming or agricultural purposes, then a nonjudicial
foreclosure/forfeiture remedy is available only to Seller by using a real
estate contract not a deed of trust.)
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A. SECTION 1031 LIKE-KIND EXCHANGE. If either Seller or Buyer intends for
this transaction to be a part of a Section 1031 like-kind exchange, then
the other party agrees to cooperate in the completion of the like-kind
exchange so long as the cooperating party incurs no additional liability
in doing so, and so long as any expenses (including attorneys fees and
costs) incurred by the cooperating party that are related only to the
exchange are paid or reimbursed to the cooperating party at or prior to
closing.
5. INSPECTION CONTINGENCIES. This Agreement shall terminate and Buyer shall
receive a refund of the earnest money unless Buyer gives written notice to
Seller within eighteen (18) days (20 days if not filled in) of mutual
acceptance of this Agreement stating that Buyer is reasonably satisfied
with specified results of the following inspections. If such notice is
timely given, the inspection contingencies stated in this Section 5 shall
be deemed to be satisfied.
A. BOOKS, RECORDS, LEASES, AGREEMENTS. Seller shall make available for
inspection by Buyer or its agents as soon as possible but no later than
ten (10) five (5) days after mutual acceptance of this Agreement all
documents available to Seller relating to the ownership and operation of
the Property including without limitation: (i) statements for real estate
taxes, assessments, and utilities, property management agreements, service
contracts, leases of personal property or fixtures, leases of all or a
portion of the Property, and a schedule of tenants, rents, and deposits;
(ii) plans, specifications, permits, drawings, surveys, reports, and
maintenance records; and (iii) accounting records and audit reports.
Buyer shall determine within the contingency period stated in the
preceding introductory paragraph whether it wishes and is able to assume,
as of closing, all of the foregoing leases, contracts, and agreements
which have terms extending beyond closing
B. PROPERTY INSPECTION. Seller shall permit Buyer or its agents, at
Buyer's sole expense and risk, to enter the Property, at reasonable times
after legal notice to tenants, to conduct inspections concerning the
structural condition of the improvements, all mechanical, electrical and
plumbing systems, hazardous materials (limited to a Phase I audit only),
pest infestation, soils conditions, sensitive areas, wetlands, or other
matters affecting the feasibility of the Property for Buyer's intended
use. Buyer agrees to indemnify and defend Seller from all liens, costs,
expenses, including attorneys and expert fees, arising from or relating to
Buyer's entry onto and inspection of the Property. This agreement to
indemnify and defend Seller shall survive closing.
6. TITLE INSURANCE.
A. TITLE REPORT. Seller authorizes Lender and Listing Agent, Selling
Licensee or Closing Agents, at Seller's expense, to apply for and deliver
to Buyer a [ ] standard [ ] extended (standard, if not completed) coverage
owner's policy of title insurance. If an extended coverage owner's policy
specified, Buyer shall pay the increased costs associated with that policy
including the excess premium over that charged for a standard coverage
policy, and the cost of any survey required by the title insurer. The
title report shall be issued by First American Title Company by July 12th.
B. PERMITTED EXCEPTIONS. Buyer shall notify Seller of any objectionable
matters in the title commitment or any supplemental report within ten (10)
days after receipt of such commitment or supplement. Buyer may not object
to the following: (a) rights of tenants existing as of closing; (b) real
property taxes due after closing; (c) if consistent with Buyer's intended
use of the Property, easements and reservations including reserved oil,
gas, and/or mineral rights; and (d) governmental building and land use
regulations, codes, and laws. This Agreement shall terminate and Buyer
shall receive a refund of the earnest money, less any costs advanced or
committed for Buyer, unless (a) within ten (10) days of Buyer's notice of
such objections, Seller agrees to remove all objectionable provisions; or
(b) within fifteen (15) days after Buyer's notice of such objections,
Buyer notifies Seller in writing that it waives any objections which
Seller does not agree to remove. The provisions referenced in (a) through
(d) above and those provisions not objected to or for which Buyer waived
its objections shall be referred to collectively as the "Permitted
Exceptions." The title policy shall contain no exceptions other than the
General Exclusions and Exceptions common to such form of policy and the
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Permitted Exceptions.
7. CLOSING OF SALE. This sale shall be closed on or before July 26, 1995
("closing") by First American Title Company ("Closing Agent"). Buyer and
Seller will, immediately on demand, deposit with Closing Agent all
instruments and monies required to complete the purchase in accordance
with this Agreement. "Closing" shall be deemed to have occurred when all
documents are recorded and the sale proceeds are available to Seller. If
this sale cannot be closed by the above date, because of circumstances
beyond the control of the party whose performance is delayed, closing
shall be extended seven (7) days beyond cessation of such circumstance but
in not event more than thirty (30) days beyond the above date. Time is of
the essence in the performance of this Agreement.
8. CLOSING COSTS. Seller shall pay the excise tax and premium for the owner's
extended coverage title policy. Seller and Buyer shall each pay one-half
of the escrow fees. Real and personal property taxes and assessments
payable in the year of closing; rents on any existing tenancies; interest;
mortgage reserves; utilities; and other operating expenses shall be
pro-rated as of closing. Security, cleaning, and any other unearned
deposits on tenancies, and remaining mortgage or other reserves shall be
assigned to Buyer at closing. The real estate commission is due on closing
or upon Seller's default under this Agreement, whichever occurs first, an
neither the amount nor due date thereof can be changed without Listing
Agent's written consent.
9. POST-CLOSING ADJUSTMENTS, COLLECTIONS, AND PAYMENTS. After closing, Buyer
and Seller shall reconcile the actual amount of revenues or liabilities
upon receipt or payment thereof to the extent those items were prorated or
credited at closing based on estimates. Any bills or invoices received by
Buyer after closing which relate to services rendered or goods delivered
to the Seller or the Property prior to closing shall be paid by Seller
upon presentation of such bill or invoice. At Buyer's option, Buyer may
pay such bill or invoice and be reimbursed the amount paid plus interest
at the rate of twelve percent (12%) per annum beginning fifteen (15) days
from the date of Buyer's written demand to Seller for reimbursement until
such reimbursement is made. Rents collected from each tenant after closing
shall be applied for the benefit of Seller for delinquent rentals owed for
a period prior to closing. The amounts applied for the benefit of Seller
shall be turned over by Buyer to Seller promptly after receipt.
10. OPERATIONS PRIOR TO CLOSING. Prior to closing, Seller shall continue to
operate and maintain the Property in the ordinary course of its business
and shall operate the Property in compliance with all applicable laws,
rules, regulations and ordinances. Seller shall not enter into or modify
existing rental agreements or leases (except that Seller may modify or
terminate residential rental agreements or leases in the ordinary course
of its business), service contracts, or other agreements affecting the
Property which have terms extending beyond closing without first obtaining
Buyer's consent, which shall not be unreasonably withheld. Seller shall
maintain the condition of the Property in the condition existing on the
date of mutual acceptance of the Agreement.
11. POSSESSION. Buyer shall be entitled to possession, subject to existing
tenancies, [ ] on closing [ ] _____________ (on closing, if not
completed).
12. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and warrants to
Buyer that, to the best of Seller's knowledge, each of the following is
true as of the date hereof and shall be true as of closing: (a) Seller is
authorized to enter into the Agreement to sell the Property, and to
perform its obligations under the Agreement; (b) all books, records,
leases, agreements and other items delivered to Buyer pursuant to Section
5 above are accurate and complete; (c) the Property and the business
conducted thereon comply with all applicable laws, regulations, codes and
ordinances; (d) Seller has all certificates of occupancy, permits, and
other governmental consents necessary to own and operate the Property for
its current use; (e) there is no pending or threatened litigation which
would adversely affect Buyer's ownership of the Property after closing;
(f) there are no covenants, conditions, restrictions, or contractual
obligations of Seller which will adversely affect Buyer's ownership of the
Property after closing, or prevent Seller from performing its obligations
under the Agreement, except as disclosed in the preliminary commitment for
title insurance or
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as otherwise disclosed to Buyer in writing prior to closing; (g) there is
no pending or threatened condemnation or similar proceedings affecting the
Property, and except as otherwise disclosed in the preliminary commitment
for title insurance as or otherwise disclosed to Buyer in writing prior to
closing, the Property is not within the boundaries of any planned or
authorized local improvement district; (h) Seller has paid (except to the
extent prorated at closing) all local, state and federal taxes (other than
real and personal property taxes and assessments described in Section 8
above) attributable to the period prior to closing which, if not paid,
could constitute a lien on Property (including any personal property), or
for which Buyer may be held liable after closing; and (i) Seller warrants
that, to the best of Seller's knowledge, there are no pending or
threatened notices of violation of building, zoning, or land use codes
applicable to the property, and that Seller is not aware of any concealed
material defects in the Property except _________________. Seller makes no
representations or warranties regarding the Property other than those
specified in this Agreement, Buyer otherwise takes the Property "AS IS,"
and Buyer shall otherwise rely on its own pre-closing inspections and
investigations.
13. HAZARDOUS SUBSTANCES. Seller represents and warrants to Buyer that, to the
best of its knowledge: (i) there are no Hazardous Substances (as defined
below) currently located in, on, or under the Property in a manner or
quantity that presently violates any Environmental Law (as defined below);
(ii) there are no underground storage tanks located on the Property; and
(iii) there is no pending or threatened investigation or remedial action
by any governmental agency regarding the release of Hazardous Substances
or the violation of Environmental Law at the Property. As used herein, the
term "Hazardous Substances" shall mean any substance or material now or
hereafter defined or regulated as a hazardous substance, hazardous waste,
toxic substance, pollutant, or contaminant under any federal, state, or
local law, regulation, or ordinance governing any substance that could
cause actual or suspected harm to human health or the environment
("Environmental Law"). The term "Hazardous Substances" specifically
includes, but is not limited to petroleum, petroleum by-products, and
asbestos. Seller agrees to indemnify, defend and hold Buyer harmless from
and against any and all claims, liabilities, losses, penalties,
remediation costs and expenses (including attorneys' and consultants' fees
and costs) that Buyer may incur or have asserted against it as a result of
the presence of any Hazardous Substance in, on, or under the Property
which violates any Environmental Law at any time prior to closing. The
provisions of this Section 13 shall survive closing or termination of this
Agreement.
14. PERSONAL PROPERTY. This sale includes the following personal property:
[X] None [ ] That portion of the personal property located on and used in
connection with the Property, which Seller will itemize in an Addendum to
be attached to this Agreement within ten (10) days of mutual acceptance
(None, if not completed). The value assigned to the personal property
shall be the amount agreed upon by the parties and, if they cannot agree,
the County-assessed value if available, and if not available, the fair
market value determined by an appraiser selected by the Listing Agent and
Selling Licensee. Seller warrants title to, but not the condition of, the
personal property and shall convey it by bill of sale.
15. CONDEMNATION AND CASUALTY. Buyer may terminate this Agreement and obtain a
refund of the earnest money, less any costs advanced or committed for
Buyer, if improvements on the Property are destroyed or materially damaged
by casualty before closing, or if condemnation proceedings are commenced
against all or a portion of the Property before closing.
16. FIRPTA - TAX WITHHOLDING AT CLOSING. Closing Agent is instructed to
prepare a certification (CIBA or PSMLA Form 22E, or equivalent) that
Seller is not a "foreign person" within the meaning of the Foreign
Investment in Real Property Tax Act. Seller agrees to sign this
certification. If Seller is a foreign person, and this transaction is not
otherwise exempt from FIRPTA, Closing Agent is instructed to withhold and
pay the required amount to the Internal Revenue Service.
17. CONVEYANCE. Title shall be conveyed by a Statutory Warranty Deed subject
only to the Permitted Exceptions. If this Agreement is for conveyance of
Seller's vendee's interest in a Real Estate Contract, the Statutory
Warranty Deed shall include a contract vendee's assignment sufficient to
convey after acquired title. At closing, Seller shall transfer to
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Buyer by written assignment all agreements, service contracts, rental
agreements, tenant leases, leases of potential property or fixtures, and
any other agreements or contract rights which Buyer is assuming pursuant
to Section 5 of the Agreement. The written assignment shall provide that
Seller shall be responsible for and shall indemnify Buyer against any
defaults occurring by reason of actions taken by Seller or performance due
prior to closing, and that Buyer shall assume and indemnify Seller against
liability arising from all performance due after closing.
18. SEATTLE REQUIREMENTS. If the Property is in the City of Seattle, (a)
Seller shall deliver to Buyer a Certificate of Land Use and Local
Assessments (not applicable to single family dwellings not represented to
be a lawful site for more than one dwelling unit), and (b) Seller warrants
that U.L. approved smoke detectors are installed. Only in buildings
constructed before 1980 may the smoke detectors be battery powered.
19. NOTICES. Unless otherwise specified, any notice required, or permitted in,
or related to, this Agreement must be in writing; signed by any one Buyer
or Seller (including either husband or wife); and received by or at the
selling office of Selling Licensee who, for this limited purpose, shall be
the Agent of both parties. Any time limit in or applicable to a notice
shall commence on the day following receipt of the notice by the Selling
Licensee, unless that is a Saturday, Sunday or holiday, in which event it
will commence on the next following business day. SELLER AND BUYER MUST
KEEP SELLING LICENSEE ADVISED OF THEIR WHEREABOUTS TO RECEIVE PROMPT
NOTIFICATION OF RECEIPT OF NOTICE. SELLING LICENSEE HAS NO RESPONSIBILITY
TO ADVISE OF RECEIPT OF A NOTICE BEYOND EITHER PHONING THE PARTY OR
CAUSING A COPY OF THE NOTICE TO BE DELIVERED TO THE PARTY'S ADDRESS ON
THIS AGREEMENT.
20. AGENCY DISCLOSURE. At the signing of this Agreement, Selling Licensee, Bob
Bencze and Arvin Vander Veen of Colliers Macaulay Nicolls International,
represented Buyer, and Listing Agent, N/A, represented Seller. Each party
signed this Agreement confirms that prior oral and/or written disclosure
of agency or non-agency was provided to him/her in this transaction.
21. ASSIGNMENT. Buyer [X] may [ ] may not (may not, if not completed) assign
this Agreement, or Buyer's rights hereunder, without Seller's prior
written consent, unless provided otherwise herein.
22. DEFAULT AND ATTORNEY'S FEE. In the event Buyer fails, without legal
excuse, to complete the purchase of the Property, then (check one):
[X] that portion of the earnest money which does not exceed five percent
(5%) of the purchase price shall be forfeited to Seller (subject to
Seller's obligation to pay certain costs and a commission under Section 25
below) as the sole and exclusive remedy available to Seller for such
failure; or
Seller may, at its option, (a) keep as liquidated damages all or a portion
of the earnest money (subject to Seller's obligation to pay certain costs
and a commission under Section 21 below) as the sole and exclusive remedy
available to Seller for such failure, (b) bring suit against Buyer for
Seller's actual damages, (c) bring suit to specifically enforce this
Agreement and recovery any incidental damages, or (d) pursue any other
rights or remedies available at law or equity.
If Buyer, Seller, Listing Agent or Selling Licensee institutes suit
concerning this Agreement, the prevailing party is entitled to court costs
and a reasonable attorney's fees. In the event of trial, the amount of the
attorney's fees shall be fixed by the court. The venue of any suit shall
be the county in which the Property is located, and this Agreement shall
be governed by the laws of the state where the Property is located.
23. MISCELLANEOUS PROVISIONS.
A. COMPLETE AGREEMENT. The Agreement and any addenda and exhibits to it
state the entire understanding of Buyer and
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Seller regarding the sale of the Property. There are no verbal agreements which
modify or affect the Agreement.
B. NO MERGER: The terms of the Agreement shall not merge in the deed or
other conveyance instrument transferring the Property to Buyer at closing. The
terms of this Agreement shall survive closing.
C. COUNTERPART SIGNATURES. The Agreement may be signed in counterpart,
each signed counterpart shall be deemed and original, and all counterparts
together shall constitute one and the same agreement.
24. ACCEPTANCE; COUNTEROFFERS. Seller has until 12:30 p.m. of July 5, 1996 to
accept this offer (if not filled in, the third business day following the
last Buyer signature below). Acceptance is not effective until a signed
copy hereof is actually received by or at the office of Selling Licensee.
If this offer is not so accepted, it shall lapse and Selling Licensee
shall refund the earnest money to Buyer. (If either party makes a future
counteroffer, the other party shall have until 5:00 p.m. on the ______ day
(if not filled in, the second day) following the receipt or at the office
of Selling Licensee to accept the counteroffer, unless sooner withdrawn.
Acceptance is not effective until a signed copy thereof is received by or
at the office of Selling Licensee. If the counteroffer is not accepted or
countered, this Agreement shall lapse and the earnest money shall be
refunded to the Buyer.
25. SELLER'S ACCEPTANCE AND BROKERAGE AGREEMENT. Seller agrees to sell the
Property on the terms and conditions herein, and further agrees to pay a
commission in an amount computed in accordance with the listing agreement.
If there is no written listing agreement, Seller agrees to pay a
commission of _______ ( %) of the sales price or One Hundred Thousand and
No/100 Dollars ($100,000). This is a reduced commission from the normal 6%
or $165,000. The commission shall be apportioned between Listing Agent and
Selling Licensee as specified in the listing agreement or any co-brokerage
agreement. Seller assigns to Listing Agent and Selling Licensee a portion
of the sales proceeds equal to the commission. If the earnest money is
retained as liquidated damages, any costs advanced or committed by Listing
Agent or Selling Licensee for Buyer or Seller shall not be reimbursed or
paid therefrom, and the balance shall be paid one-half to Seller and
one-half to Listing Agent and Selling Licensee according to the listing
agreement and any co-brokerage agreement. Seller acknowledges receipt of a
copy of this Agreement, signed by both parties.
26. LISTING AGENT AND SELLING LICENSEE DISCLOSURE. EXCEPT AS OTHERWISE
DISCLOSED IN WRITING TO BUYER OR SELLER, NEITHER SELLING LICENSEE NOR
LISTING AGENT HAS MADE ANY REPRESENTATIONS OR WARRANTIES CONCERNING THE
LEGAL EFFECT OF THIS AGREEMENT, BUYER'S OR SELLER'S FINANCIAL STRENGTH, OR
THE PROPERTY, INCLUDING WITHOUT LIMITATION, THE PROPERTY ZONING,
COMPLIANCE WITH APPLICABLE LAWS (INCLUDING LAWS REGARDING ACCESSIBILITY
FOR DISABLED PERSONS), OR HAZARDOUS MATERIALS. SELLER AND BUYER ARE EACH
ADVISED TO SEEK INDEPENDENT LEGAL AND TAX ADVICE ON THESE AND OTHER
MATTERS RELATED TO THIS AGREEMENT. IF THE SAME BROKER REPRESENTED BOTH
BUYER AND SELLER IN THIS TRANSACTION, BUYER AND SELLER HEREBY CONFIRM THAT
THEY WERE TIMELY ADVISED OF THE DUAL REPRESENTATION, THAT THEY CONSENTED
AND HEREBY CONSENT TO THE SAME AND THAT THEY DO NOT EXPECT THE BROKER TO
DISCLOSE TO EITHER OF THEM ANY CONFIDENTIAL INFORMATION OBTAINED FROM THE
OTHER PARTY.
UNITED SUPPORT ASSOCIATION, INC.
Buyer /s/ CHRISTOPHER CARDE Date JULY 4 19 96 Home Ph.
__________________________ ___________ ____ _______________
Buyer Date 19 Home Ph.
__________________________ ___________ ____ _______________
6
<PAGE> 7
Buyer's Address:_______________________________________ Fax No.________________
Selling Licensee (Company)
By /s/ BOB BIANCIO
_________________________________________
Seller_________________________ Date___________ 19 ____ Home Ph._______________
Seller_________________________ Date___________ 19 ____ Home Ph._______________
Print Seller's Names:_________________________________________
Seller's Address:_____________________________________________
Listing Office:_______________________________________________
27. BUYER'S RECEIPT. Buyer acknowledges receipt of a Seller signed copy of
this Agreement on _________________________________, 19_____.
BUYER___________________________________ Buyer__________________________________
7
<PAGE> 8
COLLIERS MACAULAY NICOLLS INTERNATIONAL
ADDENDUM NO. 1
ADDENDUM NO. 1 to Real Estate Purchase and Sale Agreement dated July 4, 1986, by
and between United Support Association, Inc., as Purchaser, and James M. Saghi,
as his separate estate, as Seller.
1. Purchase Price Payment
The purchase price is payable to Sun Life of Canada as follows:
$750,000 in cash at the time of closing to include any earnest money paid.
The balance of $2,550,000 shall be placed on a promissory note secured by
a first deed of trust with Sun Life of Canada on subject property. The
note shall call for monthly payments of $50,000 for the first twelve
months to include interest at the rate of 8% per year starting thirty (30)
days from the date of closing. The next eighteen months shall call for
monthly payments of $100,000 to include interest at the rate of 8% per
year. The note shall be due on the thirty-first month when the remaining
balance and interest shall be due. There shall be no pre-payment penalty.
2. Sun Life Approval
This agreement is subject to approval of the financial terms by Sun Life
of Canada.
3. James M. Saghi and Sun Life of Canada agree to hold harmless and indemnify
United Support Association, Inc. from any cause of action, present or
future, arising directly or indirectly between Sun Life of Canada and
James M. Saghi concerning the subject property.
4. James M. Saghi shall surrender the deed in lieu of foreclosure to Sun Life
of Canada upon acceptance of the financial terms of the subject Purchase
and Sale Agreement.
5. Seller is to terminate all leases, service agreements and contracts
affecting subject property by July 26, 1996.
ACKNOWLEDGED AND AGREED to this ACKNOWLEDGED AND AGREED to this
4th day of JULY, 1996. ____day of________________, 1996.
BUYER SELLER
By: /s/ CHRISTOPHER CARDE By:
________________________________ ________________________________
Its:_______________________________ Its:_______________________________
8
<PAGE> 9
EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY
PARCEL 1:
LOTS 1, 2 AND 3 IN BLOCK 15 OF HILLMAN'S SEATTLE GARDEN TRACTS, AS PER PLAT
RECORDED IN VOLUME 11 OF PLATES, PAGE 24, RECORDS OF KING COUNTY:
EXCEPT THE NORTHEASTERLY 40 FEET THEREOF CONDEMNED FOR ROAD PURPOSES IN KING
COUNTY SUPERIOR COURT CAUSE NO. 109001;
TOGETHER WITH AN EASEMENT FOR EXISTING DRIVEWAY OVER AND ACROSS THE SOUTHERLY 5
FEET OF THE EASTERLY 315 FEET OF LOT 4 IN SAID BLOCK;
EXCEPT THE NORTHEASTERLY 40 FEET THEREOF CONDEMNED AS AFORESAID;
SITUATED IN THE CITY OF TUXWILA, COUNTY OF KING, STATE OF WASHINGTON.
PARCEL 2:
THE NORTH 250 FEET, AS MEASURED ALONG THE WEST LINE OF LOT 2, INTERURBAN
ADDITION TO SEATTLE, AS PER PLAT RECORDED IN VOLUME 10 OF PLATS, PAGE 55,
RECORDS OF KING COUNTY;
EXCEPT THAT PORTION DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHWEST CORNER OF SAID LOT;
THENCE SOUTH ALONG THE WEST LINE OF SAID LOT 250.00 FEET;
THENCE NORTH 89 DEGREES 37 MINUTES 52 SECONDS EAST 178.40 FEET;
THENCE NORTHWESTERLY TO A POINT ON THE NORTH LINE OF SAID LOT WHICH IS NORTH 89
DEGREES 37 MINUTES 52 SECONDS EAST A DISTANCE OF 10.00 FEET FROM THE POINT OF
BEGINNING;
THENCE SOUTH 89 DEGREES 37 MINUTES 52 SECONDS WEST 10.00
FEET TO THE POINT OF BEGINNING OF SAID EXCEPTION.
SITUATED IN THE CITY OF TUKWILA, COUNTY OF KING, STATE OF WASHINGTON.
PARCEL 3:
THAT PORTION OF TUKWILA TRAP NO. 1 LYING SOUTHERLY OF LOT 1, BLOCK 15 OF
HILLMAN'S SEATTLE GARDEN TRACTS, AS PER PLAT RECORDED IN VOLUME 11 OF PLATS,
PAGE 24, RECORDS OF KING COUNTY, WASHINGTON DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTH LINE OF SAID LOT 1, LYING S89 DEGREES 37 FEET
52 INCHES W 136.89 FEET FROM THE INTERSECTION OF SAID SOUTH LINE, WITH THE
SOUTHWESTERLY MARGIN OF INTERURBAN AVENUE SOUTH (THE SOUTHWESTERLY LINE OF THE
NORTHEASTERLY 40 FEET OF LOT 1); THENCE N89 DEGREES 37 FEET 52 INCHES E 39SE
FEET TO A POINT ON A CURVE TO THE RIGHT WITH A 150.00 FOOT RADIUS AND INITIAL
RADIAL BEARING OF S22 DEGREES 13 FEET 28 INCHES E. THENCE SOUTHWESTERLY ON SAID
CURVE AN ARC OF 122.06 FEET AND
9
<PAGE> 10
CENTRAL ANGEL OF 3 DEGREES LESS THAN 42 FEET 40 INCHES TO THE SOUTH LINE OF SAID
LOT 1; THENCE N89 DEGREES 37 FEET 52 INCHES E 59.56 FEET TO THE POINT OF
BEGINNING.
10
<PAGE> 11
COLLIERS MACAULAY NICHOLLS INTERNATIONAL
DEPOSIT NOTE
$200,000 Seattle, Washington
July 4, 1996
FOR VALUE RECEIVED, each of the undersigned promises to pay in lawful
money of the United States, without grace, to Colliers Macaulay Nicholls
International ("CMNI"), or order, at Seafirst Fifth Avenue Plaza, 800
Fifth Avenue, Suite 3000, Seattle, Washington 98104, or at such other
place as the holder hereof from time to time may designate in writing, the
principal sum of Two Hundred Thousand and No/100 Dollars ($200,000) with
no interest thereon. This note shall be paid on removal or waiver of
contingencies contained in the Real Estate Purchase and Sale Agreement of
even date herewith.
After maturity, this Note shall bear interest at the maximum legal rate.
If this Note shall be placed in the hands of an attorney for collection or
if ___________ shall be brought to collect any of the principal or
interest on this Note, each of the undersigned promises to pay all costs
of collection, including reasonable attorneys' fees incurred thereby.
Each maker of this Note executes the same as a principal and not as a
__________. The obligations of this Note shall be joint and several. Each
of the undersigned and all endorsers and all persons liable or to become
liable on this Note under ____________________, demand _________ and
notice of demand, ____________ and nonpayment and consent to any and all
remedies and _____________ of the ____________ of payment hereof may be
modified without affecting the liability of any party to this Note or any
person liable with respect to any individuals _______________ thereby.
This Note shall be construed according to the laws of the State of
Washington.
PURCHASER:
By: /s/ CHRISTOPHER CARDE
____________________________
Its:___________________________
Date: 7/4/96
__________________________
Address:
11
<PAGE> 12
PROMISSORY NOTE
$3,3335,000.00 Dated: June 18, 1992
Seattle, Washington
FOR VALUE RECEIVED, the undersigned, JAMES M. SAGHI, a married man
as his sole and separate property (hereinafter referred to as the
"Maker"), hereby promises to pay to the order of SUN LIFE ASSURANCE
COMPANY OF CANADA (U.S.), a Delaware corporation (hereinafter referred to
as the "Holder"), c/o Draper Shaw Associates, Inc., 9706 Fourth Avenue
N.E., Suite 201, Seattle, Washington 98115, or at such other place as the
Holder may from time to time designate in writing, the principal sum of
THREE MILLION THREE HUNDRED FIFTY-FIVE THOUSAND AND NO/100 DOLLARS
($3,355,000.00), plus interest on the outstanding principal at the rate of
nine percent (9%) per annum from the day the funds of the loan evidenced
by this Note are wire transferred by Holder until fully paid, payable in
the following manner:
On the first (1st) day of July, 1992, all interest which will accrue
under this Note from the day of wiring the loan funds through June 30,
1992 shall be paid by the Maker to the Holder. Commencing on the first
(1st) day of August, 1992, and on the first (1st) day of each calendar
month thereafter, Maker shall make payments of principal and interest at
said rate to Holder in the amount of TWENTY-SIX THOUSAND NINE HUNDRED
NINETY-SIX AND NO/100 DOLLARS ($26,996.00) per month. Notwithstanding
anything to the contrary contained herein, the entire unpaid principal
balance plus accrued interest shall be paid in full in the form of a final
balloon payment on May 31, 1997. Notwithstanding anything further to the
contrary, in the event the encroachment of the building on the Property
onto the South 147th Street right-of-way and any set-back violation
related thereto are not fully resolved to Holder's satisfaction by May 31,
1993, then the entire unpaid principal balance plus accrued interest shall
be due in full on June 1, 1993. All scheduled payments shall, in the
absence of a default by Maker under this Note, be applied first to the
interest due, and any balance shall be applied in reduction of principal.
The principal and interest hereto shall be payable in lawful money of the
United States of America which shall be legal tender for public and
private debts at the time of payment. In no event shall the interest rate
exceed the legal rate of interest provided for under the laws of the State
of Washington.
The privilege is reserved to prepay in full, but not in part, on any
monthly payment due, subject to giving thirty (30) days' prior written
notice and subject to the payment of a prepayment premium which shall be
the greater of (a) two percent (2%) of the then outstanding balance of
this Note, or (b) a Yield Maintenance Prepayment Fee computed as follows:
the proceeds of the prepayment will be assumed to be immediately
reinvested in a United States Treasury Security having a coupon interest
rate and maturity most closely equivalent to that of this Note. If the
yield on that certain United States Treasury Security, as published in the
Wall Street Journal on the fifth (5th) business day prior to the date of
prepayment, is:
(1) less than nine percent (9%) per annum, Maker shall pay to
Holder a fee equal to the positive difference between the two,
divided by twelve (12), multiplied by the number of whole or partial
months remaining until the maturity date of this Note and multiplied
by the then outstanding balance of this Note; or
(2) greater than or equal to nine percent (9%) per annum, then
the prepayment fee shall be two percent (2%) of the then outstanding
balance of this Note.
No prepayment premium shall be due after February 28, 1997. If an event of
default occurs under this Note or the documents securing the loan
evidenced by this Note, thereby causing Holder to accelerate the loan
evidenced by this Note prior to the maturity date, including the last
eleven (11) days prior to a non-judicial trustee's sale under RCW 61.24
Holder will sustain damages due to the loss of its investment.
Accordingly, in the event of any default and consequent
12
<PAGE> 13
acceleration of the Note, the Deed of Trust or any other instruments given
as further security for repayment of this Note, Maker will be required, to
the extent permitted by law, to pay as liquidated damages an acceleration
premium of the greater of (a) three percent (3%) of the then outstanding
balance of this Note, or (b) a reinvestment formula amount calculated as
follows: the amount accelerated will be assumed to be immediately
reinvested in a United States Treasury Security having a coupon interest
rate and maturity most closely equivalent to that of this Note. If the
yield on that certain United States Treasury Security, as published in the
Wall Street Journal on the fifth (5th) business day prior to the date of
acceleration, is:
(1) less than nine percent (9%) per annum, Maker shall pay
Holder an acceleration premium equal to the positive
difference between the two, divided by 12, multiplied by the
number of whole or partial months remaining until the original
maturity date of this Note, and multiplied by the then
outstanding balance of this Note, or
(2) greater than or equal to nine percent (9%) per annum, than
the acceleration premium shall be three percent (3%) of the
then outstanding balance of this Note.
It is agreed that payment of this acceleration premium shall be
additionally secured by the loan documents and will not preclude Holder
from seeking enforcement of any other remedies available to it at law or
in equity. No acceleration premium shall be payable if the loan evidenced
by this Note is reinstated more than eleven (11) days prior to the
trustee's sale. No prepayment premium shall be charged on involuntary
prepayments occasioned by condemnation, fire or casualty.
This Note evidences a loan and is secured by a first Deed of Trust
of even date herewith executed and delivered by Maker covering certain
real property therein described, together with any other security given to
further secure this Note (collectively called the "Property" herein).
It is hereby expressly agreed that, should any payment of any
installment of interest and/or principal not be made when due hereunder,
then Maker shall be in default under this Note and the entire indebtedness
represented hereby shall, at the option of the Holder of this Note,
without notice, become immediately due and payable. In addition, the
Holder of this Note may collect a "late charge" not to exceed an amount
equal to six percent (6%) of any installment which is not paid within ten
(10) days of when due, to cover the extra expenses involved in handling
delinquent payments. In the event of default in the payment of any
installment, or in any term or condition hereof, or in the Deed of Trust
or any other agreement between Maker and Holder pertaining to the
indebtedness evidenced hereby, then, with such notice as may be required
by the Deed of Trust and expiration of the applicable cure period, if any,
the entire unpaid balance of this Note shall bear interest at thirteen
percent (13%) per annum (the "Default Rate").
For the purpose of protecting Holder's security, keeping the
Property free from subordinate financing liens and allowing Holder to
raise the interest rate and collect assumption fees, Maker agrees that any
sale, conveyance, further encumbrance (including the granting of any
easements or other matters affecting title) or other transfer of title to
the Property, or any interest therein (whether voluntarily or by operation
of law) without Holder's prior written consent shall be an event of
default, the entire balance of the indebtedness and all other sums
evidenced by this Note or secured by the Deed of Trust shall be and become
immediately due and payable, at the option of Holder. In addition, to the
extent permitted by law, any prepayment charge or acceleration premium due
under this Note shall also be payable. Any consent by Holder permitting an
otherwise prohibited transfer or transaction shall not constitute a
consent to or waiver of any right, remedy or power of Holder to withhold
its consent on a subsequent occasion to a transfer not otherwise permitted
by the provisions hereof.
13
<PAGE> 14
For the purpose of, and without limiting the generality of the
foregoing, the occurrence at any time of any of the following events
without Holder's prior written consent shall be deemed to be an
unpermitted transfer of title to the property and shall constitute an
event of default under this Note.
(a) any sale, conveyance, assignment, including any assignment for
the benefit of creditors, or other transfer of, or the grant of a lien or
security interest in, all or any part of the legal or equitable interest
in the Property; or
(b) any transfer, assignment, sale, encumbrance or other
distribution of any general partnership or stock interest in Maker, or any
partnership or stock interest in any partnership or corporate general
partner of Maker.
Notwithstanding the foregoing, one time only during the term of the
Note, Holder hereby agrees to consent to the transfer of the Property in
its entirety from the original Maker to an independent third party on an
arms length basis so long as the purchaser is acceptable to Holder as
measured and analyzed by normal and ordinary standards of financial
strength, credit history, real estate management ability and experience
and professional character, and so long as Maker pays Holder an assumption
fee equal to the two percent (2%) of the then outstanding principal
balance of the Note.
Notwithstanding the foregoing, Maker shall have the right to
transfer the Property to a trust or trusts controlled by Maker without
payment of an assumption fee and any transfer resulting from the death of
Maker shall not require either the consent of Holder or the payment of any
fee.
If any action is instituted to collect this Note, or any part
hereof, or if it is placed in the hands of an attorney for collection, the
undersigned promises and agrees to pay, in addition to any costs and
disbursements provided by statute, all costs (including, but not limited
to attorneys' fees, including such fees in any trial or appellate
proceeding should litigation be instituted) incurred in connection with
the collection thereof.
The Maker and any endorsers hereof and all others who may become
liable for all or any part of this obligation, agree hereby to be jointly
and severally bound, and waive any homestead or exemption right against
said debt, and, except for notices required to be given pursuant to the
terms of this Note or the Deed of Trust, if any, jointly and severally
waive presentment, protest and demand, notice of protest and demand,
notice of dishonor and non-payment of this Note and any and all lack of
diligence or any assignment of this Note and/or the Deed of Trust or any
other agreements evidencing or securing this Note, extension of time,
release of any party liable for this obligation, release of any security
for this Note, or any other indulgence or forbearance whatsoever. Any such
assignment, extension, release, indulgence or forbearance may be made
without notice to the undersigned and without in any way affecting the
personal liability of the undersigned.
The Maker shall pay to the Holder, when so requested by Holder, in
addition to the required installment of interest and principal, a monthly
installment of one-twelfth (1/12th) of the annual real estate taxes,
insurance premiums and assessments that may be assessed upon the property
described in the Deed of Trust securing this Note.
Delay in exercising any of the Holder's rights or options hereunder
shall not constitute a waiver thereof, and waiver of any right or option
shall not constitute a waiver of the right to exercise the same in the
event of any subsequent default.
If more than one person executes this Note, the term "Maker" shall
include each as well as all of them and their obligations hereunder shall
be joint and several.
The provisions of this Note shall be binding upon and inure to the
benefit of the heirs, personal representatives, successors and assigns of
the parties hereto.
14
<PAGE> 15
This Note shall be construed according to the laws of the State of
Washington.
Time is of the essence of this Note and each and every term and
provision hereof.
Maker's financial responsibility for repayment of this Note is
limited to the Property, both real and personal, securing repayment of
this Note and Maker shall not be personally liable to Holder for any
monetary deficiency arising from a foreclosure or similar action, should
such occur. No such financial responsibility limitation shall apply,
however, to any insurance proceeds or condemnation awards received by
Maker and not applied according to the terms of the Deed of Trust, nor
shall it apply to any rents received by Maker subsequent to any default by
Maker under this Note or the Deed of Trust and not applied to the
operation of the property securing this Note or to this Note, nor will
Maker's liability be limited with respect to any matter arising from any
action taken against Maker or Holder as owner of the property securing
this Note for violation of any environmental protection law or ordinance,
including, but not limited to, all laws pertaining to asbestos, all as
more fully set forth in the Environmental Indemnity Agreement executed by
Maker in favor of Holder of even date herewith. Further, Maker hereby
agrees to undertaken and indemnify and hold Holder harmless from any and
all claims, including environmental claims, as may become liens prior and
superior to the Deed of Trust.
MAKER:
------
/s/ JAMES M. SAGHI
--------------------------------------
JAMES M. SAGHI
15
<PAGE> 1
Exhibit 10.8
EMPLOYMENT AGREEMENT
1. PARTIES:
This Agreement is between Wade Cook Seminars, Inc., 14675 Interurban Avenue
South, Seattle, Washington 98168 ("WCSI")and Wade B. Cook of Seattle, Washington
("Cook").
2. POSITION:
Cook shall be employed by WCSI as President and Chief Executive Officer. Cook
shall report directly to the Board of Directors in accordance with the Bylaws
and Articles of Incorporation.
3. EMPLOYMENT TERM:
Cook shall be employed from July 1, 1997 through June 30, 2000 unless otherwise
mutually agreed.
4. SALARY:
Cook shall be paid a minimum salary of U.S. $240,000 for the first year of this
Agreement, $265,000 for the second year of this Agreement, and $290,000 for the
final year of this Agreement. Cook shall be paid in accordance with WCSI's
standard method of payment for executives. Cook may receive additional bonuses
for work as approved by the Board of Directors ("Board").
5. OTHER COMPENSATION:
Cook shall also receive the following benefits:
A. Six weeks annual vacation leave;
B. Use of a company car;
C. Reimbursement of reasonable travel and other business expenses incurred
by Cook in the performance of his executive duties;
D. Health insurance for Cook and his family through WCSI's customary
provider;
E. Compensation for reasonable tax and accountancy advice;
F. $1 million life insurance policy up to a reasonable cost of $7500 per
year; and
G. Any other benefits provided executive employees of WCSI as outlined in
the current Personnel Handbook or as directed by the Board of
Directors.
6. TERMINATION:
This Agreement may be terminated as follows:
1
<PAGE> 2
A. By Death: WCSI shall pay to Cook's beneficiaries or estate, as
appropriate, the compensation to which he is entitled pursuant to this
Agreement through the end of the month in which the death occurs.
Thereafter, the WCSI's obligation shall terminate. Nothing in this
Section shall affect any entitlement of Cook's heirs to the benefits of
any life insurance plan purchased by WCSI.
B. By Disability: If, in the opinion of the Board of Directors, Cook shall
be prevented from properly performing his duties hereunder by reason of
any physical or mental incapacity for a period of more than one hundred
and twenty (120) days in the aggregate or sixty (60) consecutive days
in any twelve-month period (the "Disability Period"), then, to the
extent permitted by law, the Employment Term of this Agreement shall be
paid up through the last day of the month of the Disability Period and
thereafter the obligations hereunder of WCSI shall terminate.
C. By WCSI for Cause: WCSI may terminate, without liability and without
prejudice to any other remedy to which WCSI may be entitled either by
law, in equity or under this Agreement, the Employment Term at any time
and without advance notice if:
(1) In the reasonable and good faith opinion of the
Board, Cook acts, or fails to act, in bad faith and
to the material detriment of WCSI or its
subsidiaries, parent company or affiliates;
(2) Cook refuses or fails to act in accordance with any
lawful direction or order of the Board if such
failures or refusals, individually or in the
aggregate, are, in the reasonable and in good faith
opinion of the Board, material to Cook's performance;
(3) Cook commits any material act of dishonesty or a
felony affecting WCSI, its subsidiaries, parent
company or affiliates;
(4) Cook has a chemical dependency which interferes with
the performance of his executive duties and
responsibilities;
(5) Cook commits gross misconduct or neglect, or, in the
reasonable and good faith opinion of the Board,
demonstrates incompetence in the management of the
affairs of WCSI or its subsidiaries, parent company
or affiliates;
(6) Cook is convicted of a felony or any crime involving
moral turpitude, fraud or misrepresentation; or (7)
Cook materially breaches any term of this Agreement
upon 30 days written notice by WCSI.
E. By WCSI Without Cause: The Employment Period may be terminated without
Cause by WCSI only upon written notice and payment of six months
severance pay.
F. By Cook for Good Reason: Cook may terminate this Agreement for "Good
Reason" upon 30 days written notice if WCSI requires Cook to relocate
outside the Seattle area. Or
G. By Cook without Good Reason: Upon six months written notice or as
otherwise mutually agreed.
7. MERGER OR ACQUISITION OF WCSI:
In the event of a merger by WCSI or its parent company, with another company
during the Employment Term, Cook shall have the option of remaining in his
current position as President and Chief Executive Officer or shall be allowed to
terminate his employment with WCSI or new company upon the payment of the
equivalent of the remainder of the Agreement.
8. SECRECY:
Cook shall not divulge any proprietary information relating to WCSI or its
subsidiaries, parent company or affiliates, which Cook may have acquired during
his employment except as necessary in the performance of his duties with WCSI.
2
<PAGE> 3
9. RETIREMENT:
WCSI shall pay to any pension, life insurance or comparable financial planning
scheme designated by Cook an amount equal to 10% of Cook's gross salary (up to
the maximum amount permissible under the law).
10. DISPUTES:
Any dispute between the parties arising out of this Agreement which cannot be
amicably settled shall be referred to arbitration upon written notice by either
party to the other. The arbitration shall be in accordance with the
International Chamber of Commerce. Said arbitration to occur in Seattle,
Washington. Any award rendered in arbitration shall be binding and conclusive
upon the parties and shall not be subject to appeals or retrying by the court.
11. ATTORNEY FEES:
In the event this Agreement is placed in the hands of an attorney due to a
default in the payment or performance of any of its terms, the defaulting party
shall pay, immediately upon demand, the other party's reasonable attorney fees,
collection costs, costs of either litigation, mediation, or arbitration
(whichever is appropriate), whether or not a suit or action is filed, and any
other fees or expenses reasonably incurred by the non-defaulting party.
12. JURISDICTION:
This Agreement shall be governed by the laws of Washington.
13. FINAL AGREEMENT:
This Agreement is the entire, final and complete agreement of the parties and
supersedes all written and oral agreements heretofore made or existing by and
between the parties or their representatives.
Executed in duplicate this 24th day of June, 1997.
WADE COOK SEMINARS, INC.
By: /s/ Kiman Lucas
-------------------------------
Name: Kiman Lucas
Title: General Counsel
Date: 6/24/97
/s/ Wade B. Cook
- - ----------------------------------
Wade B. Cook
Date: 6/24/97
<PAGE> 1
EXHIBIT 10.9
COMMERCIAL LEASE
This lease is made between Wade Cook Seminars, Inc., herein called
Lessor, and U.S.A. Corporate Services, Inc., herein called Lessee.
Lessor hereby offers to lease to Lessee the premises situated in the
City of Tukwila, County of King, State of Washington, described as 1340 square
feet of the second floor of 14675 Interurban Ave. South, Seattle, WA 98168, upon
the following TERMS and CONDITIONS:
1. TERM AND RENT. Lessor agrees to rent the above premises for a
term of 1 year, commencing July 1, 1997 and terminating on June 30, 1998 or
sooner as provided herein at the monthly rental of ($1.00 per square feet)
payable in advance on the first day of each month for that month's rental,
during the term of this lease. All rental payments shall be made to Lessor, at
the address specified above.
2. USE. Lessee shall use and occupy the premises for conducting
business. The premises shall be used for no other purpose. Lessor represents
that the premises may lawfully be used for such purpose.
3. CARE AND MAINTENANCE OF PREMISES. Lessee acknowledges that the
premises are in good order and repair, unless otherwise indicated herein. Lessee
shall, at his own expense and at all times, maintain the premises in good and
safe condition, and shall surrender the same at termination hereof, in as good
condition as received, normal wear and tear excepted. Lessee shall be
responsible for all repairs required, excepting the roof, exterior walls and
structural foundations.
4. ALTERATIONS. Lessee shall not, without first obtaining the
written consent of Lessor, make any alterations, additions, or improvements, in,
to or about the premises.
5. ORDINANCES AND STATUTES. Lessee shall comply with all
statutes, ordinances and requirements of all municipal, state and federal
authorities now in force, or which may hereafter be in force, pertaining to the
premises, occasioned by or affecting the use thereof by Lessee.
6. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this lease
or sublet any portion of the premises without prior written consent of the
Lessor, which shall not be unreasonably withheld. Any such assignment or
subletting without consent shall be void and, at the option of the Lessor, may
terminate this lease.
7. UTILITIES. The rental cost shall include heating, air
conditioning, sewer, water, gas and electricity. Lessee shall be solely liable
for all telephone services.
<PAGE> 2
8. ENTRY AND INSPECTION. Lessee shall permit Lessor or Lessor's
agents to enter upon the premises at reasonable times and upon reasonable
notice, for the purpose of inspecting the same.
9. POSSESSION. If Lessor is unable to deliver possession of the
premises at the commencement hereof, Lessor shall not be liable for any damage
caused thereby, nor shall this lease be void or voidable, but Lessee shall not
be liable for any rent until possession is delivered. Lessee may terminate this
lease if possession is not delivered within 30 days of the commencement of the
term hereof.
10. INDEMNIFICATION OF LESSOR. Lessor shall not be liable for any
damage or injury to Lessee, or any other person, or to any property, occurring
on the demised premises or any part thereof, and Lessee agrees to hold Lessor
harmless from any claim for damages, no matter how caused.
11. INSURANCE. Lessee, at his expense, shall maintain plate glass
and public liability insurance including bodily injury and property damage
insuring Lessee and Lessor with minimum coverage as follows:
Lessee shall provide Lessor with a Certificate of
Insurance showing Lessor as additional insured. The
Certificate shall provide for a ten-day written
notice to Lessor in the event of cancellation or
material change of coverage. To the maximum extent
permitted by insurance policies which may be owned
by Lessor or Lessee, Lessee and Lessor, for the
benefit of each other, waive any and all rights of
subrogation which might otherwise exist.
12. EMINENT DOMAIN. If the premises or any part thereof or any
estate therein, or any other part of the building materially affecting Lessee's
use of the premise, shall be taken by eminent domain, this lease shall terminate
on the date when title vests pursuant to such taking. The rent, and any
additional rent, shall be apportioned as of the termination date, and any rent
paid for any period beyond that date shall be repaid to Lessee. Lessee shall not
be entitled to any part of the award for such taking or any payment in lieu
thereof, but Lessee may file a claim for any taking of fixtures and improvements
owned by Lessee, and for moving expenses.
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13. DESTRUCTION OF PREMISES. In the event of a partial destruction
of the premises during the term hereof, from any cause, Lessor shall forthwith
repair the same, provided that such repairs can be made within sixty (60) days
under existing governmental laws and regulations, but such partial destruction
shall not terminate this lease, except that Lessee shall be entitled to a
proportionate reduction of rent while such repairs are being made, based upon
the extent to which the making of such repairs shall interfere with the business
of Lessee on the premises. If such repairs cannot be made within said sixty (60)
days, Lessor, at his option, may make the same within a reasonable time, this
lease continuing in effect with the rent proportionately abated as aforesaid,
and in the event that Lessor shall not elect to make such repairs which cannot
be made within sixty (60) days, this lease may be terminated at the option of
either party. In the event that the building in which the demised premises may
be situated is destroyed to an extent of not less than one-third of the
replacement costs thereof, Lessor may elect to terminate this lease whether the
demised premises be injured or not. A total destruction of the building in which
the premises may be situated shall terminate this lease.
14. LESSOR'S REMEDIES ON DEFAULT. If Lessee defaults in the
payment of rent, or any additional rent, or defaults in the performance of any
of the other covenants or conditions hereof, Lessor may give Lessee notice of
such default and if Lessee does not cure any such default within 30 days, after
the giving of such notice (or if such other default is of such nature that it
cannot be completely cured within such period, if Lessee does not commence such
curing within such 30 days and thereafter proceed with reasonable diligence and
in good faith to cure such default), then Lessor may terminate this lease on not
less than 30 days' notice to Lessee. On the date specified in such notice the
term of this lease shall terminate, and Lessee shall then quit and surrender the
premises to Lessor, but Lessee shall remain liable as hereinafter provided. If
this lease shall have been so terminated by Lessor, Lessor may at any time
thereafter resume possession of the premises by any lawful means and remove
Lessee or other occupants and their effects. No failure to enforce any term
shall be deemed a waiver.
15. SECURITY DEPOSIT. Lessee shall deposit with Lessor on the
signing of this lease the sum of 0 Dollars ($0) as security deposit for the
performance of Lessee's obligations under this lease, including without
limitation, the surrender of possession of the premises to Lessor as herein
provided. If Lessor applies any part of the deposit to cure any default of
Lessee, Lessee shall on demand deposit with Lessor the amount so applied so that
Lessor shall have the full deposit on hand at all times during the term of this
lease.
16. ATTORNEY'S FEES. In case suit should be brought for recovery
of the premises, or for any sum due hereunder, or because of any act which may
arise out of the possession of the premises, by either party, the prevailing
party shall be entitled to all costs incurred in connection with such action,
including a reasonable attorney's fee.
17. NOTICES. Any notice which either party may, or is required to
give, shall be given by mailing the same, postage prepaid, to Lessee at the
premises, or Lessor at the
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address first written, or at such other places as may be designated by the
parties from time to time.
18. HEIRS, ASSIGNS, SUCCESSORS. This lease is binding upon and
inures to the benefit of the heirs, assigns and successors in interest to the
parties.
19. SUBORDINATION. This lease is and shall be subordinated to all
existing and future liens and encumbrances against the property.
20. ENTIRE AGREEMENT. The foregoing constitutes the entire
agreement between the parties and may be modified only by a writing signed by
both parties.
21. WASHINGTON LAW. This Agreement and its application shall be
governed by the laws of the State of Washington.
22. DISPUTES. Any dispute between the parties arising out of this
Agreement which cannot be amicably settled shall be referred to arbitration upon
written notice by either party to the other. The arbitration shall be in
accordance with the rules of the American Arbitration Association. Said
arbitration to occur in Seattle, Washington. Any award rendered in arbitration
shall be binding and conclusive upon the parties and shall not be subject to
appeals or retrying by the court.
Signed this 25th day of June, 1997.
U.S.A. Corporate Services, Inc. Wade Cook Seminars, Inc.
By /s/ J. Scott Scheurman By /s/ Wade B. Cooke
------------------------------- -------------------------------
Lessee Lessor
<PAGE> 1
EXHIBIT 10.10
LIGHTHOUSE PUBLISHING GROUP, INC.
PUBLISHING AGREEMENT
This AGREEMENT is effective the 1st day of November 1996, between Wade
B. Cook of Seattle, Washington (hereinafter called the Author) and Lighthouse
Publishing Group, Inc. , whose principal place of business is at 14675
Interurban Avenue South, Seattle, Washington, 98168-4664, (hereinafter called
the Publisher).
I. GRANT OF The Author hereby grants, assigns, and transfers to the
RIGHTS Publisher the following exclusive rights and privileges to
and in connection with a Work, presently entitled Real
Estate Money Machine which Work is a book.
A. The sole and exclusive book publication rights in the
United States, its territories, dependencies, and
possessions, the Republic of the Philippines, and Canada,
and the right to sell copies of the Work in the open market
throughout the world.
B. The sole and exclusive subsidiary publication
and performance rights set forth in Article VIIA below.
These subsidiary publication and performance rights are
granted to the Publisher for the United States, its
territories, dependencies, and possessions, the Republic of
the Philippines, and Canada, and include the right to
authorize others to exercise in any foreign country any of
the rights granted to the Publisher.
II. COPYRIGHT It is understood and greed that the copyright shall be
secured by the Publisher in the name of the book and the
Publisher is hereby authorized to take all steps required to
secure such copyright in the United States of America. The
Publisher agrees to print an appropriate copyright notice in
each and every copy of the published work and to require all
parties to whom it grants licenses in connection with the
work to do the same. The party in whose name copyright is
registered shall hold for the benefit of the other such
rights as the equities hereby created may prescribe. Unless
it specifically agrees to do so in writing, the Publisher
shall not be responsible for securing any copyright outside
the United States of America.
III. MANUSCRIPT The Author agrees to deliver to the Publisher not
later than November 28 , 1996 three finally revised copies
of the manuscript, approximately 70,000 words in length,
satisfactory in form, style, and content and acceptable to
the Publisher in its sole judgment and discretion.
FORM OF A. Unless otherwise agreed in writing, the Author shall
MANUSCRIPT furnish promptly and free of charge to the Publisher,
complete and ready for reproduction, all drawings, maps,
photographs, charts and designs which are a part of or
necessary to the text. If the Author fails to supply any
necessary drawings, maps, photographs, charts and designs in
satisfactory form and within the specified time, the
Publishers shall have the right to have them made and the
charges and expenses of making them shall be paid for by the
Author.
B. The Publisher may, at his discretion, cause an
index to be made of the work and charge the cost thereof
against any sums due the Author hereunder.
AUTHOR C. The provisions as to satisfaction and acceptability
COMPLIANCE to the Publisher and time of delivery of such copy are
material terms of this agreement and upon the Author's
failure to comply with any of such provisions, the Publisher
may at its option by written notice to the Author terminate
this agreement, whereupon the Author shall return to the
Publisher all amounts which it may have advance to him. In
such event, if the manuscript should be completed
subsequently, the Author shall nevertheless be obligated to
offer the same to the Publisher, which at its option, shall
have the right to publish the same upon the terms of the
agreement.
CORRECTIONS D. If the Publisher is directed by the Author to make
alterations in any proofs from final copy as delivered,
which shall cost more than ten percent of the cost of
composition of the Work, the Author agrees to pay said
excess. The Author shall pay in full for any corrections in
the plates which
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he requires or which are necessary for the correction of
actual errors after the plates have been made in conformity
with the last proof as corrected by the Author. The
Publisher shall upon request keep the Author informed of
such excess charges.
SUBSEQUENT E. When the Publisher considers it necessary, it shall
REVISIONS have the right in its sole discretion to call upon the
Author to revise the Work, and the Author shall make such
revisions. The provisions of this agreement shall apply to
revision of the Work by the Author as though any such
revision were the original Work being published for the
first time, except that the manuscript of the revised Work
shall be delivered in final form by the Author to the
Publisher within a reasonable amount of time; further, no
initial payment shall be made in connection with such
revision. Should the Author not provide the revision within
a reasonable time, or should the Author be deceased, the
Publisher may have the revision done and charge the cost of
such revision against royalties due or that may become due
the Author, and may display in the revised Work, and in
advertising, the name of the person or persons who revised
the Work.
RETYPING F. If in the opinion of the publisher it is considered
expedient to have the manuscript retyped in as many copies
as shall be necessary, the cost of such retyping shall be
borne by the Author.
PUBLISHER'S G. The Publisher shall be free to prepare the
DETERMINA- manuscript of the Work for the printer in such manner as
TION shall be consistent with their publishing house style. All
details as to the manner of publication, distribution and
advertising, including the format and price of the Work in
its manufactured form and the number and distribution of
free copies, shall be left to the sole discretion of the
Publisher.
H. The Publisher will use the same care in protecting
the manuscript and other material supplied to it hereunder
as is its customary practice in protecting similar material
in its possession, but it shall not be liable for damages,
if any, resulting from the loss or destruction of such
materials or any part thereof.
IV. ADVANCE The Publisher will pay to the Author as an advance
payment against all monies accruing to the Author under this
agreement the sum of: None
V. ROYALTIES A. The Publisher shall pay to the Author the following
royalties on regular net sales, other than sales falling
within (B) through (F) below on the Retail selling price of
each copy sold: 10% on all copies sold.
LIMITED REPRINT B. The Publisher shall pay the Author one half of the
EDITION stipulated royalty, as stated above, on all copies sold from
a reprinting of 3,500 copies or less, made after one year
from the date of the first publication, this reduced royalty
being provided by reason of the increased cost of
manufacturing of small reprintings, to enable the Publisher
to keep the Work in print and circulation as long as
possible.
SALE OF C. Where sheets are sold, except as a remainder, the
SHEETS percentage of royalty shall be the same as for bound books
and shall be calculated on the net amount received by the
Publisher.
FREE COPIES D. No royalties shall be paid on copies furnished
gratis to the Author, or for review, advertising, samples or
like purposes.
EXCERPTS E. The Author grants sole and exclusive rights to the
PERMISSIONS Publisher in the exercise of its discretion, to grant
permission to publish extracts from the Work, whether or not
a fee shall be collected on the Work for such use, the
Publisher warranting to make no gratuitous grants of
permissions, except as shall, in its estimate, advance the
sale of the Work or enhance the public esteem of the Author;
the Publisher shall pay to the Author one half of all sums
of money received as compensation for such grants of
permission to reprint extracts.
The Publisher is authorized to permit publication of
the Work in Braille, or photographing, recording and/or
microfilming the Work for the physically handicapped without
payment of fees and
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without compensation to the Author, providing no
compensation is received by the Publisher. In case a
compensation is received, the Publisher shall pay the Author
fifty percent (50%) of the proceeds.
VI. REMAINDERS - A. If, in the opinion of the Publisher, the Work shall
OVERSTOCK become unsalable in the ordinary channels of the trade the
Publisher may at its option sell part or all of the
remaining copies as "remainders" after first informing the
Author of its intention to do so.
B. The Author shall receive a royalty of ten percent of
the amount of the Publisher's sale price secured over the
cost of production for all copies of overstock which the
Publisher deems it expedient to sell at "remainder" prices,
i.e., at less than half of the catalog retail price, except
when these are sold at or below cost, in which case no
royalty shall be paid.
VII. SUBSIDIARY A. The further and additional rights referred to in this
RIGHTS agreement are hereby defined to include the rights
enumerated below, and are to be shared by the Author and
the Publisher in the percentage indicated, less only such
direct expenses, including agent's commissions, as shall be
incurred by the Publisher in disposing of such rights:
<TABLE>
<CAPTION>
To Author To Publisher
<S> <C> <C>
1. Abridgment, condensation, or digest......................... 50% 50%
2. Anthology or quotation...................................... 50% 50%
3. Book clubs or similar organizations......................... 50% 50%
4. Reprint..................................................... 50% 50%
5. Special editions............................................ 50% 50%
6. Second serial and syndication (including reproduction in
compilations, magazines, newspapers, or books).............. 50% 50%
</TABLE>
B. All revenue derived from the sale of rights not
specifically enumerated, whether now in existence or
hereinafter coming into existence, shall be shared
equally by the Author and the Publisher.
C. All such rights shall be disposed of by the sale,
lease, license, or otherwise by the Publisher who for that
purpose is constituted the attorney-in-fact of the Author.
The Author agrees to sign, make, execute, deliver and
acknowledge all such papers, documents and agreements as may
be necessary to effectuate the grants hereinabove
contemplated. In the event that the Author shall fail to do
so, they may be signed, executed, delivered and acknowledged
by the Publisher as the attorney-in-fact of the Author with
the same full force and effect as if signed by the Author.
All sums due under this Agreement shall be paid to the
Author's agent Money Chef, Inc. or other designated agent.
whose receipt shall be a full and valid discharge of the
Publisher's obligations and who shall act with the authority
of the Author in all matters arising out of this agreement.
IX. PUBLICATION The Publisher, in consideration of the rights granted,
DATE agrees to publish the work at its own expense, in such style
or styles as the Publisher deems most advisable, not later
than 3 months after the Publisher's acceptance of the final
revised manuscript (except on account of late delivery of
manuscript by the Author, strikes, fires, other
contingencies beyond the control of the Publisher or its
suppliers, or advisability of postponement because of
prospective advantageous trade conditions, in which event
publication shall be postponed.)
XI. AUTHOR'S A. The Author represents and warrants to the
WARRANTY Publisher: (a) that the work is original; (b) that he is the
sole author and proprietor thereof, and has full power to
enter into this agreement; c) that the work has not
heretofore been published in whole or part in volume form
and that he has not entered into or become subject to any
contract, agreement or understanding with respect thereto
other than this agreement; (d) that if published it will not
infringe upon any proprietary right at common law, or any
statutory copyright, or any other right whatsoever; and (e)
that it is innocent and contains no matter whatsoever that
is obscene, libelous, in violation of any right of privacy
or otherwise in contravention of law. The Author shall
indemnify and hold harmless the Publisher against any damage
or judgment, including court costs and attorneys' fees,
which may be sustained or recovered against the Publisher by
reason of the publication or sale of the Work, arising from
anything contained therein. Author shall also reimburse the
Publisher for all expenses including court costs, attorneys'
fees and amounts paid in settlement, sustained by the
Publisher in resisting any claim, demand, suit, action or
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proceeding asserted or instituted against the Publisher
based upon the publication sale of the Work by reason of
anything contained therein.
PLAINTIFF ACTION B. The Author hereby grants to the Publisher the right,
COPYRIGHT if copyright is in the Author's name, to bring in the name
ASSIGNMENT of the Author as plaintiff or complainant, any action or
proceeding for the enjoining of an infringement of the
copyright in the said Work and for any damages resulting
therefrom, and the net amount recovered after deducting all
expenses of suit shall be divided equally between the Author
and Publisher. The copyright shall be assigned by either
party to the other on demand, when necessary for bringing,
defending or maintaining a copyright action under this
agreement, after the termination of which action the
copyright shall on demand be reassigned.
COMPETING C. The Author will not, without the written consent
WORKS of the Publisher, write, print, publish or produce, or
cause to be written, printed, published or produced, during
the continuance of this contract, any other edition of said
Work or any work in any form of a similar character or title
tending to interfere with or injure the sale of the Work in
any manner.
AUTHOR'S D. The Author agrees, in the event that the Author
PERMISSION plans to incorporate in the Work any writings or composition
previously published elsewhere, to obtain and deliver to the
Publisher proper and complete written permission and
authorization to reprint same from the owner of the
copyright covering same.
XII. WITHDRAWAL In case the Publisher fails to keep said Work in print
OF WORK and for sale and after written demand from the Author,
declines or neglects to reprint the work within six months
and to offer it for sale, or in the event that, after one
year from the date of the first publication, the Work in the
opinion of the Publisher is no longer merchantable or
profitable, and it gives one month's notice to the Author of
its desire and intention to discontinue publication, this
contract shall terminate and all rights preserved, with any
plates of illustrations furnished by the Author and any
remaining copies and sheets shall be transferred to the
Author, provided that Author shall pay the manufacturing
costs (including composition) of such plates and the
manufacturing cost of such remaining copies or sheets, in
default of which payments the Publisher shall have the
rights to destroy any plates and to sell remaining copies or
sheets at cost of less, without payment of royalty to the
Author upon such copies or sheets. In case of the
termination of the contract, if the copyright is in the name
of the Publisher it shall assign said copyright to the
Author.
The Work shall not be considered to be out of print
if it is on public sale in any printed edition, in the
United States, or if there shall be in existence a contract
for cheap edition publication which provides for publication
within six (6) months after the work is out of print in the
regular edition.
XIII. BANKRUPTCY A. If a petition in bankruptcy (as distinguished from
reorganization or arrangement) shall be filed by the
Publisher, or shall be filed against the Publisher and
finally sustained, the Author shall have right to buy back,
at his option, to be exercised in thirty days, the rights of
publication at their fair market value, to be determined by
agreement, together with any plates or remaining copies of
sheets, at their fair market value, this also to be
determined by agreement, and thereupon this contract shall
terminate. However, no reversion of rights under this clause
shall take place until after the Author has repaid to the
Publisher any indebtedness incurred by him and still
outstanding under this agreement. If this agreement contains
a clause of option on future books by the Author, such
clause shall become null and void in event of the
Publisher's bankruptcy or receivership.
AUTHOR'S B. The Author, upon his written request, shall have the
EXAMINATION right to examine or cause to be examined through certified
public accountants the books of account of the Publisher
insofar as such books of account shall relate to the Work.
If such examination shall reveal errors of accounting (other
than those arising from an interpretation of this agreement)
amounting to a sum in excess of ten percent of the total
royalties earned in the period under examination to the
Author's disadvantage, the costs of such examination shall
be borne by the Publisher, otherwise such costs shall be
borne by the Author.
XIV. SEMI-ANNUAL The Publisher agrees to render semi-annual statements of
STATEMENTS account to March 31st and September 30th of each year, on
the succeeding July 1st and January 1st and to make
settlements in cash or about said last mentioned dates. In
making accountings, the Publisher shall have the right to
allow
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PAYMENTS for a reasonable reserve against returns and nonpayment of
invoices for copies billed out by the Publisher.
XV. AUTHOR'S The Publisher agrees to present to the Author 100 (one
COPIES hundred) free copies of said Work upon publication, and to
permit the Author to purchase from it further copies for its
own personal use, at a discount of forty percent off list
price. Author shall be billed directly for these copies, and
shall make payment therefor within 30 days of invoice date.
No consignment sales shall be made to Author. Author shall
not receive royalties on sales made to him.
XVI. RECOVERABLE All payments made by Publisher to the Author, whether
PAYMENTS under this agreement or not, shall be chargeable against
and recoverable from any or all monies accruing to the
Author under this contract and for all other contracts
between the parties or their assigns.
XVIII. TAX It is mutually agreed that State, Federal, and Foreign
WITHHOLDING taxes on the Author's earnings, when paid by the Publisher,
are proper charges against the Author's earnings due under
this agreement, and may be withheld by the Publisher.
XVIII. ASSIGNMENT This agreement shall be binding upon and shall
ensure to the benefit of the parties hereto, their
successors, assigns, executors, administrators and/or
personal representatives and may be assigned by either party
hereto, except that no assignment by the Author shall be
valid against the Publisher unless the Publisher has
received written notice therefrom from the Author and has
consented to the same in writing.
XIX. Any controversy or claim arising out of this
ARBITRATION agreement or the breach thereof shall be settled by
arbitration in accordance with rules then obtaining of
the American Arbitration Association, and judgment upon
the award may be entered in the highest court of the
form, State or Federal, having jurisdiction. Such
arbitration shall be held in the City of Seattle,
Washington, unless otherwise agreed by the parties. The
Author may at his option, in case of failure to pay
royalties, refuse to arbitrate, and pursue his legal
remedies.
XX. NOTICES Any written notice required under any of the
provisions of this agreement shall be deemed to have been
properly served by delivery in person or by mailing the same
to the parties hereto at the addresses set forth above,
except as the addresses may be changed by notice in writing;
provided, however, that notices of termination shall be sent
by registered mail.
XXI. WAIVER A waiver of any breach of this agreement or of any
of the terms or conditions by either party thereto shall not
be deemed a waiver of any repetition of such breach or in
any wise affect any other terms or conditions hereof; no
waiver shall be valid or binding unless it shall be in
writing, and signed by the parties.
XXII. DELIVERY OF This agreement shall not be binding on either the
CONTRACT Publisher or the Author unless it is signed by both parties
and delivered to the Publisher within a period of two months
from the date of the agreement.
The changes, alterations and interlineations made in Articles VII, X, XVI of
this contract and the additional Articles numbered NONE made and added before
execution hereof.
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IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
respective hands and seals the day and year first above written.
LIGHTHOUSE PUBLISHING GROUP, INC.
/s/ JERALD MILLER /s/ WADE B. COOK
- - ------------------------------------ ---------------------------------
By: Jerald Miller Wade B. Cook, Author
6/26/97 6/26/97
- - ------------------------------------ ---------------------------------
Date: Date:
/s/ JODI COAL /s/ ROBIN ANDERSON
- - ------------------------------------ ---------------------------------
Witness Witness
Name: Jodi Coal Name: Robin Anderson
6/26/97 6/26/97
- - ------------------------------------ ---------------------------------
Date: Date:
